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What changed in J.Jill, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of J.Jill, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+311 added−304 removedSource: 10-K (2023-03-30) vs 10-K (2022-04-13)

Top changes in J.Jill, Inc.'s 2023 10-K

311 paragraphs added · 304 removed · 228 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

62 edited+24 added−27 removed2 unchanged
Biggest changeIn addition, we expect to continue delivering high quality customer focused product assortments across each of our channels, while strengthening visual merchandising and maintaining a balance between newness and core staples. 7 Marketing and Advertising We leverage a variety of marketing and advertising vehicles to increase brand awareness, acquire new customers, drive customer traffic across our channels, and strengthen and reinforce our brand image.
Biggest changeJ.Jill also believes it has the opportunity to continue to optimize its assortment architecture by delivering the right mix and flow of fashion and basics to its channels. In addition, J.Jill expects to continue delivering high quality customer focused product assortments across each of its channels, while strengthening visual merchandising and maintaining a balance between newness and core staples.
The public can obtain any documents that are filed by us at www.sec.gov. 10 In addition, this Annual Report on Form 10-K, as well as future quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to all of the foregoing reports, are made available free of charge on our Internet website (https://www.jjill.com) as soon as reasonably practicable after such reports are electronically filed with or furnished to the SEC.
The public can obtain any documents that are filed by us at www.sec.gov. 9 In addition, this Annual Report as well as future quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to all of the foregoing reports, are made available free of charge on our Internet website (https://www.jjill.com) as soon as reasonably practicable after such reports are electronically filed with or furnished to the SEC.
Item 1. Business In this Annual Report, unless otherwise indicated or the context otherwise requires, references to the “Company,” “J.Jill,” “we,” “us,” and “our” refer to J.Jill, Inc. and its consolidated subsidiaries. We operate on a 52- or 53-week fiscal year that ends on the Saturday that is closest to January 31.
Item 1. B usiness In this Annual Report, unless otherwise indicated or the context otherwise requires, references to the “Company,” “J.Jill,” “we,” “us,” and “our” refer to J.Jill, Inc. and its consolidated subsidiaries. We operate on a 52- or 53-week fiscal year that ends on the Saturday that is closest to January 31.
Upon receipt, merchandise is further inspected on a test basis for consistency in cut, size and color, as well as for conformity with specifications and overall quality of manufacturing. Our sourcing team ensures that the customer has a consistent product and satisfying brand experience regardless of product size, color or collection.
Upon receipt, merchandise is further inspected on a test basis for consistency in cut, size and color, as well as for conformity with specifications and overall quality of manufacturing. J.Jill’s sourcing team ensures that the customer has a consistent product and satisfying brand experience regardless of product size, color or collection.
The team further focuses on quality control to ensure that merchandise meets required technical specifications and inspects the merchandise to ensure it meets our strict standards, including regular in-line inspections while goods are in production.
The team further focuses on quality control to ensure that merchandise meets required technical specifications and inspects the merchandise to ensure it meets J.Jill’s strict standards, including regular in-line inspections while goods are in production.
Retail stores are replenished from this facility and shipped by third-party delivery services, providing our retail stores with a steady flow of new inventory that helps to maintain product freshness. Our distribution system is designed to operate in an efficient and cost-effective manner, including our ability to profitably support individual direct orders.
Retail stores are replenished from this facility and shipped by third-party delivery services, providing its retail stores with a steady flow of new inventory that helps to maintain product freshness. J.Jill ’s distribution system is designed to operate in an efficient and cost-effective manner, including its ability to profitably support individual direct orders.
Our customers strongly associate our product with a modern balance of style, quality, comfort and ease suitable for a broad range of occasions at accessible price points. Our customer-focused assortment spans a full range of sizes and is designed to provide easy wardrobing that is relevant to her lifestyle.
J.Jill customers strongly associate its product with a modern balance of style, quality, comfort and ease suitable for a broad range of occasions at accessible price points. Its customer-focused assortment spans a full range of sizes and is designed to provide an easy wardrobe that is relevant to her lifestyle.
Within our Direct channel, ecommerce represented approximately 94% of Direct channel net sales and phone orders represented 6% of Direct channel net sales. Our website, www.jjill.com , delivers to customers an engaging shopping experience by featuring updates on new collections, guidance on how to wardrobe and wear our products and the ability to chat live with a sales representative.
Within its Direct channel, ecommerce represented approximately 95% of Direct channel net sales and phone orders represented 5% of Direct channel net sales. J.Jill’s website, www.jjill.com , delivers to customers an engaging shopping experience by featuring updates on new collections, guidance on how to wardrobe and wear its products, and the ability to chat live with a sales representative.
As on our website and in our retail stores, our catalogs reflect our product offering in settings that align with our merchandise segments, including our sub-brands, and provide guidance on styling and wardrobing. Our catalogs are designed in-house, providing us greater creative control as well as effectively managing our production costs.
As on its website and in its retail stores, J.Jill’s catalogs reflect its product offering in settings that align with its merchandise segments, including its sub-brands, and provide guidance on styling and wardrobe. J.Jill’s catalogs are designed in-house, providing greater creative control as well as effectively managing production costs.
Of these associates, 278 were employed in our headquarters in Quincy, Massachusetts, 2,299 were employed in our retail stores and field management team, and 319 worked in our distribution and customer contact center and administrative office in Tilton, New Hampshire. The number of associates, particularly part-time associates, fluctuates depending upon seasonal needs.
Of these associates, 293 were employed in its headquarters in Quincy, Massachusetts, 2,400 were employed in its retail stores and field management team, and 291 worked in its distribution and customer contact center and administrative office in Tilton, New Hampshire. The number of associates, particularly part-time associates, fluctuates depending upon seasonal needs.
Additionally, the agents manage the development of samples of merchandise produced in the factories, inspect finished merchandise, ensure the timely delivery of goods and carry out other administrative and oversight functions on our behalf. We source the remainder of our products by interacting directly with suppliers and factories both domestically and abroad.
Additionally, the agents manage the development of samples of merchandise produced in the 7 factories, inspect finished merchandise, ensure the timely delivery of goods and carry out other administrative and oversight functions on J.Jill ’s behalf. J.Jill sources the remainder of its products by interacting directly with suppliers and factories both domestically and abroad.
Our merchandise offering drives consistent sales across seasons with no quarter contributing more than 30% of total annual net sales in Fiscal Year 2021. Competition The women’s apparel industry is highly competitive. We compete with local, national and international retail chains and department stores, specialty and discount stores, catalogs and internet businesses offering similar categories of merchandise.
J.Jill ’s merchandise offering drives consistent sales across seasons with no quarter contributing more than 27% of total annual net sales in Fiscal Year 2022. Competition The women’s apparel industry is highly competitive. J.Jill competes with local, national and international retail chains and department stores, specialty and discount stores, catalogs and internet businesses offering similar categories of merchandise.
We have an in-house, customer centric product design and development process that leverages our extensive database of customer feedback and allows us to identify and incorporate changes in our customers’ preferences. We believe our customer focused approach to product development and continual delivery of fresh, high quality products drives traffic, frequency and conversion. Highly Experienced Leadership Team.
J.Jill has an in-house, customer centric product design and development process that leverages its extensive database of customer feedback and allows J.Jill to identify and incorporate changes in its customers’ preferences. J.Jill believes its customer focused approach to product development and continual delivery of fresh, high quality products drives traffic, frequency and conversion. Highly Experienced Leadership Team.
We utilize third-party providers for customer database and customer campaign management, ensuring efficient maintenance of information in a secure, backed-up environment. Seasonality While the retail business is generally seasonal in nature, we have historically not experienced significant seasonal fluctuations in our sales.
J.Jill utilizes third-party providers for customer database and customer campaign management, ensuring efficient maintenance of information in a secure, backed-up environment. Seasonality While the retail business is generally seasonal in nature, J.Jill has historically not experienced significant seasonal fluctuations in its sales.
References in this Annual Report to “Fiscal Year 2021” refer to the fiscal year ended January 29, 2022, references to “Fiscal Year 2020” refer to the fiscal year ended January 30, 2021, and references to “Fiscal Year 2019” refer to the fiscal year ended February 1, 2020. Fiscal Years 2021, 2020, and 2019 are comprised of 52 weeks.
References in this Annual Report to “Fiscal Year 2022” refer to the fiscal year ended January 28, 2023, references to “Fiscal Year 2021” refer to the fiscal year ended January 29, 2022, and references to “Fiscal Year 2020” refer to the fiscal year ended January 30, 2021. Fiscal Years 2022, 2021, and 2020 are comprised of 52 weeks.
Omnichannel Distribution and Customer Contact Center We lease our 520,000 square foot distribution and customer contact center in Tilton, New Hampshire. The facility manages the receipt, storage, sorting, packing and distribution of merchandise for our Retail and Direct channels.
Omnichannel Distribution and Customer Contact Center J.Jill leases its 520,000 square foot distribution and customer contact center in Tilton, New Hampshire. The facility manages the receipt, storage, sorting, packing and distribution of merchandise for its Retail and Direct channels.
We continually leverage this database and apply our insights to operate our business as well as to acquire new customers and then create, build and maintain a relationship with each customer to drive optimum value. Affluent and Loyal Customer Base. We target an attractive demographic of affluent women 45 years and older.
J.Jill continually leverages this database and applies its insights to operate its business as well as to acquire new customers and then create, build and maintain a relationship with each customer to drive optimum value. Affluent and Loyal Customer Base. J.Jill targets an attractive demographic of affluent women 45 years and older.
We have programs in place to provide associates with feedback on performance and professional development planning, and our senior leadership team engages in a formal talent review and development planning process each year. During Fiscal Year 2021 we promoted approximately 244 associates to higher level positions within the Company.
J.Jill has programs in place to provide associates with feedback on performance and professional development planning, and its senior leadership team engages in a formal talent review and development planning process each year. During Fiscal Year 2022 J.Jill promoted approximately 250 associates to higher level positions within the Company.
We review and evaluate our store fleet on various factors, including customer demographics within a market, concentration of existing customers, location of existing stores, center tenant quality and mix, rental economics and overall operating performance.
J.Jill reviews and evaluates its store fleet on various factors, including customer demographics within a market, concentration of existing customers, location of existing stores, center tenant quality and mix, rental economics and overall operating performance.
Our notable health, welfare and retirement benefits include: • Company subsidized health insurance • 401(k) plan with Company matching contributions • Tuition assistance program • Paid parental leave • Flexible paid time off policies We strive to maintain an inclusive environment free from discrimination of any kind, including sexual or other discriminatory harassment.
J.Jill ’s notable health, welfare and retirement benefits include: • Company subsidized health insurance • Short and long-term disability insurance • 401(k) plan with Company matching contributions • Tuition assistance program • Paid parental leave • Flexible working arrangements • Paid time off programs J.Jill strives to maintain an inclusive environment free from discrimination of any kind, including sexual or other discriminatory harassment.
With an average annual household income of approximately $150,000, our customer has significant spending power. Our private label credit card program also drives customer loyalty and encourages spending. We believe we will continue to develop long-term customer relationships that can drive profitable sales growth. 6 Customer-Focused Product Assortment.
With an approximate median annual household income of $150,000, its customer has significant spending power. J.Jill’s private label credit card program also drives customer loyalty and encourages shopping. J.Jill believes it will continue to develop long-term customer relationships that can drive profitable sales growth. Customer-Focused Product Assortment.
We believe our distinct combination of design, service, quality and value allows us to challenge the competition effectively and we believe we differentiate ourselves based on the strength of our brand, our omnichannel platform, our strong data capabilities, our loyal customer base, our customer-focused product assortment and our highly experienced leadership team.
J.Jill believes its distinct combination of design, service, quality and value allows it to challenge the competition effectively and believes it differentiates itself based on the strength of its brand, its omnichannel platform, its strong data capabilities, its loyal customer base, its customer-focused product assortment and its highly experienced leadership team.
We frequently benchmark our compensation practices and benefits programs against those of comparable industries and in the geographic areas where our facilities are located. We believe that our compensation and employee benefits are competitive and allow us to attract and retain talent throughout our organization.
J.Jill frequently benchmarks its compensation practices and benefits programs against those of comparable industries and in the geographic areas where its facilities are located. J.Jill believes that its compensation and employee benefits are competitive and allows it to attract and retain talent throughout its organization.
All credit card holders receive invitations to exclusive customer events and promotions including special purchase events four times per year, a special offer for her birthday, and a 5% discount when purchases are made on the card.
All credit card holders receive invitations to exclusive customer events and promotions including special purchase events five times per year, a special offer for her birthday, and a 5% discount when purchases are made on the card. J.Jill promotes the benefits of its credit card to new and existing customers through its various marketing channels.
Our website also provides customers with a broader range of colors and sizes than available in our stores. Competitive Strengths Distinct, Well-Recognized Brand. The J.Jill brand represents an easy, thoughtful and inspired style that reflects the confidence of remarkable women who live life with joy, passion and purpose.
The J.Jill website also provides customers with a broader range of colors and sizes than available in its stores. Competitive Strengths Distinct, Well-Recognized Brand. The J.Jill brand represents an easy, thoughtful and inspired style that celebrates the totality of all women and fuels her joy and impact with style for all of who she is.
In Fiscal Year 2021 approximately 80% of our products were sourced through agents and 20% were sourced directly from suppliers and factories. We currently work with three primary agents that help us identify quality suppliers and coordinate our manufacturing requirements.
In Fiscal Year 2022 approximately 80% of its products were sourced through agents and 20% were sourced directly from suppliers and factories. J.Jill works with several primary agents that help it identify quality suppliers and coordinate its manufacturing requirements.
We believe that our credit card program encourages customer loyalty, repeat visits and additional spending. In Fiscal Year 2021, 49% of our gross sales were generated by our credit card holders. Sourcing and Supply Strategy We outsource the manufacturing of our products. In order to efficiently source our products, we work primarily with agents who represent suppliers and factories.
J.Jill believes that its credit card program encourages customer loyalty, repeat visits and additional spending. In Fiscal Year 2022, 52% of its gross sales were generated by its credit card holders. Sourcing and Supply Strategy To efficiently source its products, J.Jill leverages its longstanding relationships with agents who represent suppliers and factories.
Each year , we offer me rchandise collections frequently that are introduced approximately every six to eight weeks and designed and delivered to provide a consistent flow of fresh products. We create product newness through the use of different fabrics, colors, patterns and silhouettes.
Each year, J.Jill offers merchandise collections that are designed and delivered to provide a consistent flow of fresh products. J.Jill creates product newness through the use of different fabrics, colors, patterns and silhouettes.
We compete primarily on the basis of design, service, quality and value.
J.Jill competes on the basis of design, service, quality and value.
Associates have multiple ways to report inappropriate behavior, including through a confidential hotline. All reports of inappropriate behavior are promptly investigated with appropriate action taken to stop such behavior. Intellectual Property Our trademarks are important to our marketing efforts. We own or have the rights to use certain trademarks, service marks and trade names that are registered with the U.S.
Associates have multiple ways to report inappropriate behavior, including through a confidential hotline. All reports of inappropriate behavior are promptly investigated with appropriate action taken to stop such behavior. Intellectual Property J.Jill ’s trademarks are important to its marketing efforts.
Our associates are not represented by a labor union and are not party to a collective bargaining agreement. We consider our relations with our associates to be very good. 9 During Fiscal Year 2021, we continued to respond to the special challenges the COVID-19 pandemic presented, focusing on the health and safety of our associates and customers.
J.Jill 8 associates are not represented by a labor union and are not party to a collective bargaining agreement. J.Jill considers its relations with its associates to be very good. Throughout the COVID-19 pandemic, J.Jill continued to focus on the health and safety of its associates and customers.
These include promotional mailings, email communications, digital and print advertisements and public relations initiatives. We leverage our customer database to strategically optimize the value of our marketing investments across customer segments and channels. This enables us to productively acquire new customers, effectively market to existing customers, increase customer retention levels and reactivate lapsed customers.
J.Jill leverages its customer database to strategically optimize the value of its marketing investments across customer segments and channels. This enables J.Jill to productively acquire new customers, effectively market to existing customers, increase customer retention levels and reactivate lapsed customers.
It has a foundational collection of versatile shapes and proportions, in solids and prints that mix easily to provide endless options that work together. These soft knits are easy care and wrinkle-free, and always look great. We also offer accessories in unique, versatile and wearable collections.
It is a foundational collection of versatile shapes and proportions, in solids and prints that mix easily to provide endless options that work together. These soft knits are easy care and wrinkle-free, and always look great. Fit : Style designed for wellness, Fit is versatile performance-inspired apparel for athletic usage or as feel-good loungewear.
Available Information We are required to file annual, quarterly and current reports, proxy statements and other documents with the SEC under the Securities Exchange Act of 1934. The SEC maintains an Internet website that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC.
The SEC maintains an Internet website that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC.
Total Stores at Stores Stores the End of the Store Open Year Opened Closed Fiscal Year Fiscal Year 2016 15 (1 ) 275 Fiscal Year 2017 9 (8 ) 276 Fiscal Year 2018 13 (7 ) 282 Fiscal Year 2019 11 (6 ) 287 Fiscal Year 2020 — (20 ) 267 Fiscal Year 2021 — (14 ) 253 Direct Channel Our Direct channel, which represented 49.8% of total net sales for Fiscal Year 2021, consists of our website and catalog orders.
Total Stores at Stores Stores the End of the Store Open Year Opened Closed Fiscal Year Fiscal Year 2019 11 (6 ) 287 Fiscal Year 2020 — (20 ) 267 Fiscal Year 2021 — (14 ) 253 Fiscal Year 2022 1 (11 ) 243 5 Direct Channel J.Jill’s Direct channel consists of its website and catalog orders.
Our catalogs are an integral part of our business along with digital and social media. As one of our primary marketing vehicles, our catalogs promote and reinforce our brand image and drive customer acquisition and engagement across all of our channels.
Along with ecommerce, its catalogs continue to be an integral part of its business. As one of J.Jill’s key marketing vehicles, its catalogs promote and reinforce its brand image and drive customer acquisition and engagement.
We believe our strong relationships with suppliers have provided us with the ability to negotiate favorable pricing terms, further improving our overall cost structure and profitability. Our dedicated sourcing team actively negotiates and manages product costs to deliver initial mark-up objectives.
J.Jill has no long-term merchandise supply contracts as it typically transacts business on an order-by-order basis to maintain flexibility. J.Jill believes its strong relationships with suppliers have provided it with the ability to negotiate favorable pricing terms, further improving its overall cost structure and profitability. J.Jill’s dedicated sourcing team actively negotiates and manages product costs to deliver initial mark-up objectives.
Our competitors range from smaller, growing companies to considerably larger companies with substantially greater financial, marketing and other resources. Human Capital Attracting, retaining, and developing a diverse pool of talent to drive the success of our brand is a key element of our business strategy. As of January 29, 2022, we employed 1,115 full-time and 1,781 part-time associates.
Human Capital Attracting, retaining, and developing a diverse pool of talent to drive the success of the J.Jill brand is a key element of its business strategy. As of January 28, 2023, J.Jill employed 1,115 full-time and 1,869 part-time associates.
Our Retail and Direct channels complement and drive traffic to one another, and we leverage our targeted marketing initiatives to acquire new customers across channels. We consistently work towards migrating customers from a single-channel customer to a more valuable, omnichannel customer over time. Data-Centric Approach That Drives Future Profitability and Mitigates Risk.
J.Jill has developed an omnichannel business model comprised of its Retail and its Direct channel. Its Retail and Direct channels complement and drive traffic to one another, and J.Jill leverages its targeted marketing initiatives to acquire new customers across its channels. Data-Centric Approach That Drives Future Profitability and Mitigates Risk.
Customer While women of all ages are attracted to our brand, our targeted customer is 45 years and older, is college educated and has an annual household income of approximately $150,000. She leads a busy, yet balanced life, as she works outside the home, is involved in her community and has a family with children.
Customer J.Jill caters to a distinctive set of women – typically 45 years and older, college educated, and with an approximate median annual household income of $150,000. Her discretionary dollars are her own to spend and she leads a busy, yet balanced life and she is involved in her community.
In Fiscal Year 2021, we managed approximately 3.9 million customer interactions through our in-house customer contact center in Tilton, New Hampshire. Our customer contact center is responsible for nearly all live customer interactions, other than in retail stores, including order taking and further serves as an important feedback loop in gathering customer responses to our brand, product and service.
J.Jill ’s customer contact center is responsible for nearly all live customer interactions, other than in retail stores, including order taking and further serves as an important feedback loop in gathering customer responses to its brand, product and service. J.Jill continues to refine and improve its contact center strategy and experience to support the constantly evolving digital landscape.
As our customers increase their tenure with our brand, they tend to spend more and purchase more frequently. Additionally, as we retain customers over time, they tend to migrate from single channel customers to more valuable omnichannel customers. Omnichannel customers comprised approximately 22% of our active customer base for Fiscal Years 2021 2020 and 2019.
Her average tenure with the J.Jill brand is an industry-leading 10 years. Additionally, as J.Jill retains her over time, she tends to migrate from being a single channel customer to a more valuable omnichannel customer. Omnichannel customers comprised approximately 22% of J.Jill’s active customer base for Fiscal Years 2022, 2021 and 2020.
When she cannot find an item in-stock at her local store, our concierge service leverages our in-store ordering platform and ships products to her home. Site Optimization We believe the store to be an important channel for our customer and that it enhances our Direct channel sales by migrating single-channel customers to omnichannel customers.
When the customer cannot find an item in-stock at their local store, J.Jill’s in-store ordering platform ships available products to their home. Site Optimization J.Jill believes its stores to be an important channel for its customers.
We also have significant visibility into our customers’ transaction behavior (e.g., orders, returns, order value, including purchases made across our channels). As such, we can identify a single-channel customer who purchases a product through our website, our retail store or our catalogs, as well as an omnichannel customer who purchases in more than one channel.
J.Jill can identify a single-channel customer who purchases a product through its website, its retail store or its catalogs, as well as an omnichannel customer who purchases in more than one channel.
Agents work with approximately 31 suppliers on our behalf. We source our merchandise globally from ten countries with the top three by volume being India, Vietnam, and Indonesia.
Agents work with approximately 30 suppliers on J.Jill ’s behalf. J.Jill sources its merchandise globally from 11 countries with the top three by volume being India, Indonesia, and Vietnam. No single supplier accounts for more than 20% of merchandise purchased by volume.
We plan to continue leveraging our insight into customer attributes and behavior, which will guide strategic investments in our business. Enhance Product Assortment. We believe there is an opportunity to improve our productivity by selectively enhancing our assortment in certain product categories, including our Pure Jill and Wearever sub-brands, our Women’s and Petite’s businesses, and accessories.
J.Jill believes there is an opportunity to improve its productivity by selectively enhancing its assortment in certain product categories, including its Pure Jill and Wearever sub-brands, its Regular, Petite and Tall businesses, and accessories.
Patent and Trademark Office or other foreign trademark registration offices or exist under common law in the United States and other jurisdictions. Trademarks that are important in identifying and distinguishing our products and services include, but are not limited to, J.Jill ® , The J.Jill Wearever Collection ® and Pure Jill ® .
J.Jill owns or has the rights to use certain trademarks, service marks and trade names that are registered with the U.S. Patent and Trademark Office or other foreign trademark registration offices or exist under common law in the United States and other jurisdictions.
We will continue to review our fleet on an ongoing basis, balancing closings with select new store openings. 5 The following table shows new store openings and closings since Fiscal Year 20 1 6 .
J.Jill has been optimizing its fleet the past several years with the goal of closing underperforming locations and improving the overall economic health of the Retail channel. J.Jill will continue to review its fleet on an ongoing basis, balancing closings with select new store openings. The following table shows new store openings and closings since Fiscal Year 2019.
We continue to refine and improve our contact center strategy and experience to support the constantly evolving digital landscape. Information Systems We use information systems to support business intelligence and processes across our sales channels. We continue to invest in information systems and technology to enhance the customer experience and create operating efficiencies.
Information Systems J.Jill uses information systems to support business intelligence and processes across its sales channels. J.Jill continues to invest in information systems and technology to enhance the customer experience and create operating efficiencies including its initiative to upgrade its Point of Sale system.
We believe that our target demographic of women 45 years and older, is relatively underserved by media and the industry. We are refining our Brand Position to further attract these remarkable women who do not define themselves by age, size, profession, nor confine themselves by artificial boundaries or the expectations of others.
J.Jill has refined its brand position to further attract these remarkable women who do not define themselves by age, size, profession, nor confine themselves by artificial boundaries or the expectations of others. J.Jill plans to continue positioning its marketing investment to acquire new customers, reactivate lapsed customers, and retain existing customers.
We believe we have industry-leading data capture capabilities that allow us to match approximately 98% of transactions to an identifiable customer. We use our extensive customer database to track and effectively analyze customer information (e.g., name, address, age, household income and occupation) as well as contact history (e.g., catalog and email).
J.Jill believes it has industry-leading data capture capabilities that allow it to match approximately 97% of transactions to an identifiable customer. J.Jill uses its extensive customer database to track and effectively analyze customer information as well as contact history. J.Jill also has significant visibility into its customers’ transaction behavior.
We plan to continue positioning our marketing investment to acquire new customers, reactivate lapsed customers, and retain existing customers. Through our various business initiatives, we believe we will continue to attract new customers to our brand, migrate from single-channel to more profitable omnichannel customers and increase overall customer spend. Increase Direct Sales.
Through its various business initiatives, J.Jill believes it will continue to attract new customers to its brand, migrate from single channel to more profitable omnichannel customers and increase overall customer spend. 6 Increase Direct Sales. Given its strong foundation and ongoing website enhancements, J.Jill believes it can leverage its Direct platform to broaden its customer reach and drive additional sales.
Growth Strategy Key drivers of our growth strategy include: Grow Value of Our Customer Base. We have a significant opportunity to continue to attract new customers to our brand and to grow the value of our active customer base across all channels.
J.Jill has a significant opportunity to continue to attract new customers to its brand and to grow the value of its active customer base across all channels. J.Jill believes that its target demographic of women 45 years and older, is relatively underserved by media and the industry.
It is designed with a clear focus and minimalist approach to style, and reflected in simple shapes, unstructured silhouettes, interesting textures, soft natural fabrics and artful details. Wearever : Our Wearever sub-brand consists of our refined rayon jersey knit collection that is designed for work, travel and home.
It is designed with a fabric-first approach, reflected in simple designs, unique artisanal details, interesting textures, soft natural fabrics and dye and wash techniques. Wearever : Wearever is all day refined dressing designed for work, travel and home.
The website also provides enhanced capability to engage customers on mobile devices, improved access to product information and the ability to better connect with the brand on social media. Strengthen Omnichannel Capabilities.
J.Jill is undertaking initiatives to further develop its website to provide a more personalized shopping experience with more features and services for its customers. The website also provides enhanced capability to engage customers on mobile devices, and improved access to products. Strengthen Omnichannel Capabilities.
Concurrently, we remain focused on driving traffic and engagement with our website. We plan to continue enhancing the website with value-added services and growing our email file while optimizing our email contact strategy, including increased personalization. We expect that these improvements will facilitate a more cohesive and seamless shopping experience for our customer, wherever and whenever she chooses to shop.
Concurrently, J.Jill remains focused on driving traffic and engagement with its website. J.Jill plans to continue enhancing the website with value-added services and growing its email file while optimizing its marketing strategies, including increased personalization through social media.
In Fiscal Year 2021, the distribution center handled 29 million units, split between 12 million retail (41%) and 17 million direct (59%), and we believe this facility is sufficient to support our future growth. The customer contact center is an extension of our brand, providing a consistent customer experience at every stage of a purchase across all of our channels.
In Fiscal Year 2022, the distribution center handled 28 million units, split between 12 million retail (43%) and 16 million direct (57%), and J.Jill believes this facility is sufficient to support its future growth.
Our profitable store channel is enhanced by store associates who bridge the experience between the channels by helping our customer access our on-line exclusive product, sign her up for emails, encourage her to seek us out on Facebook, Instagram or Pinterest, and generally remind her that she can access us many ways.
J.Jill’s profitable store channel is enhanced by store associates who have a unique connection to its customer. Whether calling to help her access its online exclusive products, or celebrating life’s special events in store, J.Jill associates bridge the experience between the channels by reminding her that she can access J.Jill in many ways.
As of January 29, 2022, we operated 253 stores across 42 states with approximately half located in lifestyle centers and the remaining in premium malls; all our stores are leased. Our stores range in size from approximately 2,000 to 6,000 square feet, and the average store is approximately 3,700 square feet.
Further, its robust customer database and analytical capabilities allow J.Jill to be focused and strategic in identifying high potential locations and optimizing its store footprint. Store Fleet Optimization J.Jill Stores As of January 28, 2023, J.Jill operated 243 stores across 42 states with approximately half located in lifestyle centers and the remaining in premium malls; all J.Jill stores are leased.
Our rights to some of these trademarks may be limited to select markets. We also own domain names, including www.jjill.com . Corporate Information Our principal executive office is located at 4 Batterymarch Park, Quincy, MA 02169, and our telephone number is (617) 376-4300.
Corporate Information Our principal executive office is located at 4 Batterymarch Park, Quincy, MA 02169, and our telephone number is (617) 376-4300. Available Information We are required to file annual, quarterly and current reports, proxy statements and other documents with the Securities and Exchange Commission (the “SEC”) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
J.Jill offers a guiding customer experience through more than 250 stores nationwide and a robust ecommerce platform. J.Jill is headquartered outside Boston. Brand We have developed a differentiated brand image that encourages customers to build deep, personal connections with our brand.
J.Jill offers a high touch customer experience through over 200 stores nationwide and a robust ecommerce platform. J.Jill is headquartered outside Boston. Brand J.Jill has modernized its value proposition and introduced new customers to its relevant and compelling products through thoughtful, versatile designs that reflect the individuality of its customers.
In Fiscal Year 2021, there were certain changes to our senior management team, including our new Chief Executive Officer who joined the Company in February 2021 and our new Chief Human Resources Officer who joined the Company in March 2021. Our leadership team has extensive industry experience with significant expertise in merchandising, marketing, stores, ecommerce, human resources, and finance.
J.Jill’s leadership team has extensive industry experience with significant expertise in merchandising, marketing, stores, ecommerce, human resources, and finance. J.Jill’s senior leadership team has an average of 25 years of experience in retail. Growth Strategy Key drivers of J.Jill’s growth strategy include: Grow Value of Our Customer Base.
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Company Overview J.Jill is a premier omnichannel retailer and nationally recognized women’s apparel brand committed to delighting customers with great wear-now product. The brand represents an easy, thoughtful and inspired style that reflects the confidence of remarkable women who live life with joy, passion and purpose.
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Company Overview J.Jill is a national lifestyle brand that provides apparel, footwear and accessories designed to help its customers move through a full life with ease. The brand represents an easy, thoughtful, and inspired style that celebrates the totality of all women and designs its products with its core brand ethos in mind: keep it simple and make it matter.
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Our brand promise to the J.Jill customer is to delight her with great wear-now product, to inspire her confidence through J.Jill’s approach to dressing and to provide her with friendly, guiding service wherever and whenever she chooses to shop.
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J.Jill has accomplished this by clearly communicating its offerings that align with its vision: to live in a world where the totality of every woman is seen, valued and celebrated.
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We use our key brand attributes - Naturally Authentic, Thoughtfully Engaging, Relaxed Femininity, Positive Energy and Confident Simplicity - to guide brand messaging, which is consistently communicated to our customers, whether she chooses to shop on our www.jjill.com website, in our retail stores or through our catalog.
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This permeates across all J.Jill touchpoints through authentic advertising, inclusive retail experiences, and presentation of its offerings – whether the customer chooses to shop on the J.Jill website, in J.Jill retail stores, or through the J.Jill catalog.
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She values comfort, ease and versatility in her wardrobe, in addition to quality fabrics and thoughtful details. She is fashion conscious and looks to J.Jill to interpret current trends relevant to her needs and lifestyle. She is tech savvy, but also loves the J.Jill store experience and frequently engages with us across all channels.
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Product J.Jill’s products are marketed under the J.Jill brand name and sold primarily through two channels: its ecommerce platform and catalog (“Direct”) and its retail stores (“Retail”). J.Jill’s thoughtful, versatile apparel, footwear and accessories reflect the individuality of each customer and are made to seamlessly take them through every moment of their day.
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Product Our Products Our products are marketed under the J.Jill brand name and sold primarily through our Retail and Direct channels. Our diverse assortment of apparel spans knit and woven tops, bottoms and dresses as well as sweaters and outerwear. We also offer a range of complementary footwear and accessories, including scarves, jewelry and hosiery.
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J.Jill uses high quality fabrics and techniques for season-after-season comfort and style. J.Jill’s products are available across the full range of sizes including Regular, Petite and Tall, and it provides one, size-integrated shopping destination for customers with sizes from Extra Small up to 2X in store and 4X online.
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By presenting our merchandise in clear product stories, we strive to uncomplicate fashion, providing comfortable, easy and versatile collections that enable our customer to dress confidently for a broad range of occasions.
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In addition to its core assortment, J.Jill has three sub-brands, Pure Jill, Wearever, and Fit. Each demonstrate a different design ethos and offers customers a mix of casual and refined apparel based on their needs.
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Our products are available across the full range of sizes including Misses, Petites, Women’s and Tall, and reflect a modern balance of style, quality, comfort and ease at accessible price points. The core products of our assortment are designed and merchandised in-house, grounded with essential yet versatile styles and fabrications that are typically represented across a season.
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Whether they are buying versatile work, comfortable travel, or premium casual clothes for attending occasions or meeting friends, J.Jill offers its customers a variety of options for all different usage occasions. 4 Pure Jill : The highest expression of the J.Jill brand, Pure Jill reflects the art of understated ease.
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Assortments are updated each month with fresh colors, layering options, novelty and fashion. In addition to our core assortment, we have two sub-brands as extensions of our brand aesthetic and our customer lifestyle needs: 4 Pure Jill : Our Pure Jill sub-brand reflects the art of understated ease.
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J.Jill also offers accessories in unique, versatile and wearable collections. These accessory collections are primarily driven by scarves and jewelry and seamlessly complete customers wardrobes. Product Design and Development The J.Jill customer seeks newness and unique products. Through nine separate seasons, J.Jill flows designs and color palettes frequently – creating engagement and optionality for its customers.
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These accessory collections are primarily driven by scarves and jewelry and seamlessly complete our customer’s wardrobe. Product Design and Development We offer merchandise collections frequently that are introduced approximately every six to eight weeks and designed and delivered to provide a consistent flow of fresh products.
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Substantially all of J.Jill’s merchandise is designed in-house, and creating newness through different fabrics, colors, patterns and silhouettes. J.Jill also utilizes launches of its sub-brands, Pure Jill, Wearever, and Fit, to stagger new deliveries, as well as offer web edit capsules and omni refreshes to the seasons.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest change(as successor to Jill Holdings LLC), Jill Acquisition LLC, certain subsidiaries from time to time party thereto, the lenders party thereto and CIT Finance LLC as the administrative agent and collateral agent, as amended on May 27, 2016 by Amendment No. 1 thereto, as further amended on August 22, 2018 by Amendment No. 2 to reduce the frequency of borrowing base certificate submissions as long as certain conditions are maintained and as further amended on June 12, 2019 by Amendment No. 3 to extend the term date to May 8, 2023, as further amended by Amendment No. 4, dated as of September 30, 2020 (the “ABL Facility”) and our priming credit agreement, dated as of September 30, 2020 (the “Priming Facility” and, together with the Term Loan Agreement and ABL Facility, the “Credit Agreements”), each contain, and any additional debt financing we may incur would likely contain, covenants that restrict our operations, including limitations on our ability to grant liens, incur additional debt, pay dividends, cause our subsidiaries to pay dividends to us, make certain investments and engage in certain merger, consolidation or asset sale transactions.
Biggest change(as successor to Jill Holdings LLC), Jill Acquisition LLC, certain subsidiaries from time to time party thereto, the lenders party thereto and CIT Finance LLC as the administrative agent and collateral agent (as amended, the “ABL Credit Agreement” and, such facility, the “ABL Facility” and, together with the Priming Facility and the Subordinated Term Loan Facility, the “Credit Facilities” and, the agreements governing such facilities, the “Credit Agreements”), each contain, and any additional debt financing we may incur would likely contain, covenants that restrict our operations, including limitations on our ability to, among other things, incur additional indebtedness, create liens on assets, make investments, loans or advances, engage in mergers, consolidations, sales of assets and purchases, pay dividends and distributions, enter into transactions with affiliates, and make payments in respect of junior indebtedness.
The impact of the pandemic may also heighten other risks included in in this Risk Factors section, any of which could be material. The situation is changing rapidly, and future impacts may materialize that are not yet known. Even if the COVID-19 pandemic continues to subside, the Company may continue to experience adverse impacts.
The impact of the pandemic may also heighten other risks included in this Risk Factors section, any of which could be material. The situation is changing rapidly, and future impacts may materialize that are not yet known. Even if the COVID-19 pandemic continues to subside, the Company may continue to experience adverse impacts.
For example, we are required to comply with certain of the requirements of the Sarbanes-Oxley Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act, as well as rules and regulations subsequently implemented by the Securities and Exchange Commission, and the NYSE, our stock exchange, including the establishment and maintenance of effective disclosure and financial controls and changes in corporate governance practices.
For example, we are required to comply with certain requirements of the Sarbanes-Oxley Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act, as well as rules and regulations subsequently implemented by the Securities and Exchange Commission, and the NYSE, our stock exchange, including the establishment and maintenance of effective disclosure and financial controls and changes in corporate governance practices.
Dependence on our ecommerce business and the continued growth of our Direct and Retail channels subjects us to certain risks, including: • the failure to successfully implement new systems, system enhancements and internet platforms; • the failure of our technology infrastructure or the computer systems that operate our website and their related support systems, causing, among other things, website downtimes, telecommunications issues or other technical failures; • the reliance on third-party computer hardware/software providers; • rapid technological change; • liability for online content; • violations of federal, state, foreign or other applicable laws, including those relating to data protection; • credit card fraud; • cyber security and vulnerability to electronic break-ins and other similar disruptions; and • diversion of traffic and sales from our stores.
Dependence on our ecommerce business and the continued growth of our Direct and Retail channels subjects us to certain risks, including: • the failure to successfully implement new systems, system enhancements and internet platforms; 11 • the failure of our technology infrastructure or the computer systems that operate our website and their related support systems, causing, among other things, website downtimes, telecommunications issues or other technical failures; • the reliance on third-party computer hardware/software providers; • rapid technological change; • liability for online content; • violations of federal, state, foreign or other applicable laws, including those relating to data protection; • credit card fraud; • cyber security and vulnerability to electronic break-ins and other similar disruptions; and • diversion of traffic and sales from our stores.
We enter into agreements to manufacture and purchase our merchandise well in advance of the applicable selling season and our failure to anticipate, identify or react appropriately in a timely manner to changes in customer preferences, tastes and trends and economic conditions could lead to, among other things, missed opportunities, excess inventory or inventory shortages, markdowns and write-offs, all of which could negatively impact our profitability and have a material adverse effect on our business, financial condition and results of operations.
We enter into agreements to manufacture and purchase our merchandise well in advance of the applicable selling season and our failure to anticipate, identify or react appropriately in a timely manner to changes in customer preferences, tastes and trends and economic conditions could lead to, among other 10 things, missed opportunities, excess inventory or inventory shortages, markdowns and write-offs, all of which could negatively impact our profitability and have a material adverse effect on our business, financial condition and results of operations.
Any significant and unanticipated increase in postage, shipping costs, surcharges, reduction in service, slow-down in delivery or increase in paper and printing costs could impair our ability to deliver merchandise and catalogs in a timely or economically efficient manner and could adversely impact our profitability if we are unable to pass such increases directly on to our customers or if we are unable to implement more efficient delivery and order fulfillment systems, all of which could have a material adverse effect on our business, financial condition and results of operations.
Any significant and unanticipated increase in postage, shipping costs, surcharges, reduction in service, slow-down in delivery or increase in paper and printing costs could impair our ability to deliver merchandise and catalogs in a timely or economically efficient manner and could adversely impact our profitability if we are 13 unable to pass such increases directly on to our customers or if we are unable to implement more efficient delivery and order fulfillment systems, all of which could have a material adverse effect on our business, financial condition and results of operations.
If we are unable to acquire new customers in a cost-effective manner, it could have a material adverse effect on our business, financial condition and results of operations. Interruptions in our foreign sourcing operations and the relationships with our suppliers and agents could disrupt production, shipment or receipt of our merchandise, which would result in lost sales and increased costs.
If we are unable to acquire new customers in a cost-effective manner, it could have a material adverse effect on our business, financial condition and results of operations. 14 Interruptions in our foreign sourcing operations and the relationships with our suppliers and agents could disrupt production, shipment or receipt of our merchandise, which would result in lost sales and increased costs.
Competition for such qualified individuals and wage increases by other retailers could require us to pay higher wages to attract a sufficient number of employees. We are also dependent upon temporary personnel to adequately staff our stores and distribution and customer contact center, with heightened dependence during busy periods such as the holiday season.
Competition for such qualified individuals and wage increases by other retailers could require us to pay higher wages to attract a sufficient number of employees. We are 26 also dependent upon temporary personnel to adequately staff our stores and distribution and customer contact center, with heightened dependence during busy periods such as the holiday season.
Although we maintain 24 cyber-security insurance, there can be no assurances that our insurance coverage will be sufficient, or that insurance proceeds will be paid to us in a timely manner. States and the federal government have enacted additional laws and regulations to protect consumers against identity theft, including laws governing treatment of personally identifiable information.
Although we maintain cyber-security insurance, there can be no assurances that our insurance coverage will be sufficient, or that insurance proceeds will be paid to us in a timely manner. States and the federal government have enacted additional laws and regulations to protect consumers against identity theft, including laws governing treatment of personally identifiable information.
Even a claim of an alleged violation of applicable laws or regulations could negatively affect our reputation. Additionally, defending against these lawsuits and proceedings may be necessary, which could result in substantial costs and diversion of management’s attention and resources, causing a material 27 adverse effect on our business, financial condition and results of operations.
Even a claim of an alleged violation of applicable laws or regulations could negatively affect our reputation. Additionally, defending against these lawsuits and proceedings may be necessary, which could result in substantial costs and diversion of management’s attention and resources, causing a material adverse effect on our business, financial condition and results of operations.
Increased levels of promotional activity by our competitors, some of whom may be able to adopt more aggressive 12 pricing policies than we can, both on our website and in stores, may negatively impact our sales and profitability. There can be no assurances that we will be able to compete successfully with these companies in the future.
Increased levels of promotional activity by our competitors, some of whom may be able to adopt more aggressive pricing policies than we can, both on our website and in stores, may negatively impact our sales and profitability. There can be no assurances that we will be able to compete successfully with these companies in the future.
Although some level of inventory shrinkage is an unavoidable cost of doing business, if we were to experience higher rates of inventory shrinkage or incur increased security costs to combat inventory theft, it could have a material adverse effect on our business, financial condition and results of operations.
Although some level of inventory shrinkage is an unavoidable cost of doing business, if we were to experience higher rates of inventory 19 shrinkage or incur increased security costs to combat inventory theft, it could have a material adverse effect on our business, financial condition and results of operations.
As a result, TowerBrook will have effective control over the outcome of votes on all matters requiring approval by our stockholders, including entering into significant corporate transactions such as mergers, tender offers and the sale of all or substantially all of our assets and issuance of additional debt 20 or equity.
As a result, TowerBrook will have effective control over the outcome of votes on all matters requiring approval by our stockholders, including entering into significant corporate transactions such as mergers, tender offers and the sale of all or substantially all of our assets and issuance of additional debt or equity.
There can be no assurances that the revenue from new customers we acquire will ultimately exceed the cost of acquiring those customers. 15 We use paid and non-paid advertising. Our paid advertising includes catalogs, paid search engine marketing, email, display and other advertising. Our non-paid advertising efforts include search engine optimization and social media.
There can be no assurances that the revenue from new customers we acquire will ultimately exceed the cost of acquiring those customers. We use paid and non-paid advertising. Our paid advertising includes catalogs, paid search engine marketing, email, display and other advertising. Our non-paid advertising efforts include search engine optimization and social media.
The projections of future cash flows used in these analyses require the use of judgment and a number of estimates and projections 21 of future operating results. If actual results differ from our estimates, additional charges for asset impairments may be required in the future. If future impairment charges are significant, our reported operating results would be adversely affected.
The projections of future cash flows used in these analyses require the use of judgment and a number of estimates and projections of future operating results. If actual results differ from our estimates, additional charges for asset impairments may be required in the future. If future impairment charges are significant, our reported operating results would be adversely affected.
Risks Related to Intellectual Property Matters We may be unable to protect our trademarks and other intellectual property rights. We believe that our trademarks and service marks are important to our success and our competitive position due to their name recognition with our customers. We devote substantial resources to the establishment and protection of our 26 trademarks and service marks.
Risks Related to Intellectual Property Matters We may be unable to protect our trademarks and other intellectual property rights. We believe that our trademarks and service marks are important to our success and our competitive position due to their name recognition with our customers. We devote substantial resources to the establishment and protection of our trademarks and service marks.
So long as TowerBrook continues to directly or indirectly own a significant amount of our equity , even if such amount is less than 50%, TowerBrook will continue to be able to substantially influence or effectively control our ability to enter into corporate transactions.
So long as TowerBrook continues to 20 directly or indirectly own a significant amount of our equity, even if such amount is less than 50%, TowerBrook will continue to be able to substantially influence or effectively control our ability to enter into corporate transactions.
If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.
If one or more of these analysts cease coverage of our company or fail to publish 23 reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.
If we are unable to successfully manage these complexities, it may have a material adverse effect on our business, financial condition and results of operations. 19 Inventory shrinkage could have a material adverse effect on our business, financial condition and results of operations. We are subject to the risk of inventory loss and theft.
If we are unable to successfully manage these complexities, it may have a material adverse effect on our business, financial condition and results of operations. Inventory shrinkage could have a material adverse effect on our business, financial condition and results of operations. We are subject to the risk of inventory loss and theft.
If our business does not generate sufficient cash flow from operating activities to fund these expenses, we may not be able to service our 13 lease expenses, which could materially harm our business. In the future, we may not be able to negotiate favorable lease terms.
If our business does not generate sufficient cash flow from operating activities to fund these expenses, we may not be able to service our lease expenses, which could materially harm our business. In the future, we may not be able to negotiate favorable lease terms.
The issuance by us of additional shares of our common stock or securities convertible into our 23 common stock would dilute your ownership of us and the sale of a significant amount of such shares in the public market could adversely affect prevailing market prices of our common stock.
The issuance by us of additional shares of our common stock or securities convertible into our common stock would dilute your ownership of us and the sale of a significant amount of such shares in the public market could adversely affect prevailing market prices of our common stock.
We also may have difficulty negotiating real estate leases for new stores on acceptable terms. In addition, 14 construction, environmental, zoning and real estate delays may negatively affect retail location openings and increase costs and capital expenditures.
We also may have difficulty negotiating real estate leases for new stores on acceptable terms. In addition, construction, environmental, zoning and real estate delays may negatively affect retail location openings and increase costs and capital expenditures.
Further, it is unclear how the laws and regulations relating to the collection, process and use of personal data will further develop in the United States, and to what extent this may affect our operations in the future.
Further, it is unclear how the laws and regulations relating to the collection, process and use of personal data will further develop in the United States, 25 and to what extent this may affect our operations in the future.
We could also experience operational difficulties with our suppliers, such as reductions in the availability of production capacity, supply chain disruptions, errors in complying with merchandise specifications, insufficient quality control, shortages of fabrics or other raw materials, failures to meet production deadlines or increases in manufacturing costs. We source our imported merchandise from nine countries.
We could also experience operational difficulties with our suppliers, such as reductions in the availability of production capacity, supply chain disruptions, errors in complying with merchandise specifications, insufficient quality control, shortages of fabrics or other raw materials, failures to meet production deadlines or increases in manufacturing costs. We source our imported merchandise from 11 countries.
Any of these developments could have a material adverse effect on our business, financial condition and results of operations. 17 Reductions in the volume of mall traffic or the closing of shopping malls as a result of changing economic conditions or demographic patterns could significantly reduce our sales and leave us with unsold inventory.
Any of these developments could have a material adverse effect on our business, financial condition and results of operations. 16 Reductions in the volume of mall traffic or the closing of shopping malls as a result of changing economic conditions or demographic patterns could significantly reduce our sales and leave us with unsold inventory.
On the other hand, if we underestimate demand for our merchandise, we may experience inventory shortages resulting in missed sales and lost revenues. Either of these events could significantly affect our operating results and brand image and loyalty. Our profitability may also be impacted by changes in our merchandise mix and changes in our pricing.
On the other hand, if we underestimate demand for our merchandise, we may experience inventory shortages resulting in missed sales and lost revenues. Either of these events could significantly affect our operating results and brand image and loyalty. Our profitability may also be impacted by changes in our size assortments, merchandise mix and changes in our pricing.
We do not own or operate any manufacturing facilities and therefore depend upon independent third-party suppliers for the manufacturing of all of our merchandise, primarily through the use of agents. In Fiscal Year 2021, approximately 80% of our products were sourced through agents and approximately 20% were sourced directly from suppliers and factories.
We do not own or operate any manufacturing facilities and therefore depend upon independent third-party suppliers for the manufacturing of all of our merchandise, primarily through the use of agents. In Fiscal Year 2022, approximately 80% of our products were sourced through agents and approximately 20% were sourced directly from suppliers and factories.
Our business, financial condition and results of operations could be materially adversely affected if we are unable to manage inventory levels and merchandise mix and respond to changes in customer demand patterns. Inventory levels in excess of customer demand may result in lower than planned profitability.
Our business, financial condition and results of operations could be materially adversely affected if we are unable to manage inventory levels, size assortments and merchandise mix and respond to changes in customer demand patterns. Inventory levels in excess of customer demand may result in lower than planned profitability.
In recessionary periods and other periods where disposable income is adversely affected, we may have to increase the number of promotional sales or otherwise dispose of inventory for which we have previously paid to manufacture, which could further adversely affect our profitability.
In recessionary periods and other periods where disposable income is adversely affected, we may have to increase the number of promotional sales or otherwise dispose of inventory for which we have already paid to manufacture, which could further adversely affect our profitability.
The Subordinated Lenders have been issued warrants under the Subordinated Facility. On May 31, 2021, the Company chose to issue 272,097 additional shares of Common Stock under the Priming Facility. As a result of this choice and because of the antidilution provision under the warrant agreement, the penny warrants became exercisable into 3,820,748 shares of common stock.
The Subordinated Lenders have been issued warrants under the Subordinated Term Loan Facility. On May 31, 2021, the Company chose to issue 272,097 additional shares of Common Stock under the Priming Facility. As a result of this choice and because of the antidilution provision under the warrant agreement, the warrants became exercisable into 3,820,748 shares of common stock.
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Credit Facilities.” The deterioration of the earnings from, or other available assets of, our subsidiaries for any reason could also limit or impair their ability to pay dividends or other distributions to us.
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—General.” The deterioration of the earnings from, or other available assets of, our subsidiaries for any reason could also limit or impair their ability to pay dividends or other distributions to us.
To remain competitive, we may be required to offer discounted, free or other more competitive shipping options to our customers, which may result in declines in our shipping and handling fees and increased shipping and handling expense.
To remain competitive, we may be required to offer discounted, free or other more competitive shipping options to our customers, which may result in declines in our shipping and handling fees and increased shipping and handling expenses.
The top three by volume are India, Vietnam, and Indonesia. We source some merchandise from China. In Fiscal Year 2021, approximately 49% of our products were sourced in southeast Asia. Any event causing a sudden disruption of manufacturing or imports from Asia or elsewhere, including the COVID-19 pandemic and the imposition of additional import restrictions, could materially harm our operations.
The top three by volume are India, Vietnam, and Indonesia. We source some merchandise from China. In Fiscal Year 2022, approximately 47% of our products were sourced in southeast Asia. Any event causing a sudden disruption of manufacturing or imports from Asia or elsewhere, including the COVID-19 pandemic and the imposition of additional import restrictions, could materially harm our operations.
In particular, the level of customer traffic and volume of customer purchases through our Direct channel, which accounted for approximately 50% of our net sales for Fiscal Year 2021, is substantially dependent on our ability to provide a content-rich and user-friendly website, widely distributed and informative catalogs, a fun, easy and hassle-free customer experience and reliable delivery of our merchandise.
In particular, the level of customer traffic and volume of customer purchases through our Direct channel, which accounted for approximately 47% of our net sales for Fiscal Year 2022, is substantially dependent on our ability to provide a content-rich and user-friendly website, widely distributed and informative catalogs, a fun, easy and hassle-free customer experience and reliable delivery of our merchandise.
Some of the factors that might affect a supplier’s ability to ship orders of our merchandise in a timely manner or to meet our quality standards are outside of our control, including inclement weather, natural disasters, political and financial instability, including the conflict in Ukraine and the surrounding region, and the related sanctions, legal and regulatory developments, strikes, health concerns regarding infectious diseases (such as the recent outbreak of the novel coronavirus), and acts of terrorism.
Some of the factors that might affect a supplier’s ability to ship orders of our merchandise in a timely manner or to meet our quality standards are outside of our control, including inclement weather, natural disasters, political and financial instability, including the conflict in Ukraine and the surrounding region, and the related sanctions, legal and regulatory developments, strikes, health concerns regarding infectious diseases (such as the outbreak of COVID-19), and acts of terrorism.
Any significant interruption in the operations of our Tilton distribution and customer contact center, our third-party distribution, fulfillment or transportation providers, for any reason, including natural disasters, accidents, inclement weather, technology system failures, work stoppages, slowdowns or strikes or other unforeseen events and circumstances, such as the novel coronavirus outbreak, could delay or impair our ability to receive orders and to distribute merchandise to our stores and/or our customers.
Any significant interruption in the operations of our Tilton distribution and customer contact center, our third-party distribution, fulfillment or transportation providers, for any reason, including natural disasters, accidents, inclement weather, technology system failures, work stoppages, slowdowns or strikes or other unforeseen events and circumstances could delay or impair our ability to receive orders and to distribute merchandise to our stores and/or our customers.
Sales through our Direct channel, of which our ecommerce business constitutes the vast majority, accounted for approximately 50% of our total net sales for Fiscal Year 2021. Our business, financial condition and results of operations are dependent on maintaining our ecommerce business and expanding this business is an important part of our strategy to grow through our omnichannel operations.
Sales through our Direct channel, of which our ecommerce business constitutes the vast majority, accounted for approximately 47% of our total net sales for Fiscal Year 2022. Our business, financial condition and results of operations are dependent on maintaining our ecommerce business and expanding this business is an important part of our strategy to grow through our omnichannel operations.
Our goodwill and indefinite-lived intangible assets, which consist of goodwill from the controlling interest in the company held by JJill Holdings, Inc. and JJill Topco Holdings, LP, and our trade name, represented a significant portion of our total assets as of January 29, 2022.
Our goodwill and indefinite-lived intangible assets, which consist of goodwill from the controlling interest in the company held by JJill Holdings, Inc. and JJill Topco Holdings, LP, and our trade name, represented a significant portion of our total assets as of January 28, 2023.
We will continue to incur significant costs and devote substantial management time as a result of operating as a public company, particularly after we are no longer an “emerging growth company.” As a public company, we will continue to incur significant legal, accounting and other expenses.
We will continue to incur significant costs and devote substantial management time as a result of operating as a public company, particularly since we are no longer an “EGC.” As a public company, we will continue to incur significant legal, accounting and other expenses.
In addition, costs and potential problems and interruptions associated with the implementation of new or upgraded systems and technology or with maintenance or adequate support of existing systems could also disrupt or reduce the efficiency of our operations.
In addition, costs and potential problems and interruptions 24 associated with the implementation of new or upgraded systems and technology, such as our new point of sale system or with maintenance or adequate support of existing systems could also disrupt or reduce the efficiency of our operations.
To the extent any of our suppliers are unable to obtain adequate credit or their borrowing costs increase, we may experience delays in obtaining merchandise, our suppliers increasing their prices or our suppliers modifying payment terms in a manner that is unfavorable to us.
Furthermore, many of our suppliers rely on working capital financing to support their operations. To the extent any of our suppliers are unable to obtain adequate credit or their borrowing costs increase, we may experience delays in obtaining merchandise, our suppliers increasing their prices or our suppliers modifying payment terms in a manner that is unfavorable to us.
The trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about us or our business.
If securities or industry analysts do not publish research or reports about our business or publish negative reports, our stock price could decline. The trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about us or our business.
If we experience significant supply chain disruptions, the Company may not be able to develop alternate sourcing quickly on favorable terms, if at all, which could result in increased costs, loss of sales and a loss of customers, and adversely impact our financial condition and results of operations.
If we experience significant supply chain disruptions, the Company may not be able to develop alternate sourcing quickly on favorable terms, if at all, which could result in increased costs, loss of sales and a loss of customers, and adversely impact our financial condition and results of operations. 15 The failure of our suppliers to comply with our social compliance program requirements could have a material adverse effect on our reputation, business, financial condition and results of operations.
Risks Related to Our Indebtedness The terms of our term loan credit agreement and asset-based revolving credit facility restrict our operational and financial flexibility, which could adversely affect our ability to respond to changes in our business and to manage our operations. Our term loan credit agreement, dated as of May 8, 2015, by and among Jill Holdings, Inc.
Risks Related to Our Indebtedness The terms of our priming credit agreement, subordinated term loan credit agreement and asset-based revolving credit facility restrict our operational and financial flexibility, which could adversely affect our ability to respond to changes in our business and to manage our operations.
Though we have the ability to source certain merchandise categories with shorter lead times, we generally enter into contracts for a substantial portion of our merchandise well in advance of the applicable selling season.
Customer demand is difficult to predict and the lead times required for a substantial portion of our merchandise make it challenging to respond quickly to changes. Though we have the ability to source certain merchandise categories with shorter lead times, we generally enter into contracts for a substantial portion of our merchandise well in advance of the applicable selling season.
The number of outstanding shares of common stock includes 5,553,191 shares, including shares controlled by TowerBrook, that are “restricted securities,” as defined under Rule 144 under the Securities Act of 1933, as amended (the “Securities Act”), and eligible for sale in the public market subject to the requirements of Rule 144.
We have 10,165,361 outstanding shares of common stock as of January 28, 2023. The number of outstanding shares of common stock includes 5,642,663 shares, including shares controlled by TowerBrook, that are “restricted securities,” as defined under Rule 144 under the Securities Act, and eligible for sale in the public market subject to the requirements of Rule 144.
Testing and maintaining internal controls may divert our management’s attention from other matters that are important to our business. We may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act.
We may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act.
Our information technology systems and databases have been and will continue to be subject to computer viruses, malware attacks, unauthorized user attempts, phishing and denial of service and other cyber-attacks.
Our information technology systems and databases have been and will continue to be subject to computer viruses, malware attacks, unauthorized user attempts, phishing and denial of service and other cyber-attacks. Any potential breach of our information technology systems and databases could have a material adverse effect on our business, financial condition and results of operations.
We cannot predict the extent to which investor interest in our common stock will lead to the maintenance of an active trading 22 market on the NYSE or otherwise or how liquid that market might continue to be.
Active, liquid and orderly trading markets usually result in less price volatility and more efficiency in carrying out investors’ purchase and sale orders. We cannot predict the extent to which investor interest in our common stock will lead to the maintenance of an active trading market on the NYSE or otherwise how liquid that market might continue to be.
To the extent our growth strategy depends in part on our ability to open and operate new retail stores on a profitable basis and if we are not successful in implementing future retail store expansion, or if such new stores would negatively impact sales from our existing stores or from our Direct channel, our growth and profitability could be adversely impacted.
Our inability to enter into new leases or renew existing leases on terms acceptable to us or be released from our obligations under leases for stores that we close could have a material adverse effect on our business, financial condition and results of operations. 12 To the extent our growth strategy depends in part on our ability to open and operate new retail stores on a profitable basis and if we are not successful in implementing future retail store expansion, or if such new stores would negatively impact sales from our existing stores or from our Direct channel, our growth and profitability could be adversely impacted.
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Credit Facilities.” Risks Related to Our Operations We may be unable to accurately forecast our operating results and growth rate, which may adversely affect our reported results. We may not be able to accurately forecast our operating results and growth rate.
Risks Related to Our Operations We may be unable to accurately forecast our operating results and growth rate, which may adversely affect our reported results. We may not be able to accurately forecast our operating results and growth rate.
Any potential breach of our information technology systems and databases could have a material adverse effect on our business, financial condition and results of operations. 25 Risks Related to Labor Force We depend on our executive management and key personnel and may not be able to retain or replace these employees or recruit additional qualified personnel, which could harm our business.
Risks Related to Labor Force We depend on our executive management and key personnel and may not be able to retain or replace these employees or recruit additional qualified personnel, which could harm our business.
Our inability to manage our inventory levels and merchandise mix, including with respect to our omnichannel retail operations, could have a material adverse effect on our business, financial condition and results of operations. Customer demand is difficult to predict and the lead times required for a substantial portion of our merchandise make it challenging to respond quickly to changes.
Our inability to manage our inventory levels, size assortments and merchandise mix, including with respect to our omnichannel retail operations, could have a material adverse effect on our business, financial condition and results of operations.
In addition, we are required, pursuant to Section 404A of the Sarbanes-Oxley Act, to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting. This assessment includes disclosure of any material weaknesses identified by our management in our internal control over financial reporting.
In addition, pursuant to Section 404 of the Sarbanes-Oxley Act, as amended, we are required to furnish a report by 27 management and our independent registered public accounting firm is required to attest to, among other things, the effectiveness of our internal control over financial reporting.
Securities class action litigation has often been instituted against companies following periods of volatility in the overall market and in the market price of a company’s securities.
Securities class action litigation has often been instituted against companies following periods of volatility in the overall market and in the market price of a company’s securities. A securities class action lawsuit, if instituted against us, could result in substantial costs, divert our management’s attention and resources and harm our business, financial condition and results of operations.
We are a “controlled company” within the meaning of the NYSE rules and, as a result, qualify for and intend to rely on exemptions from certain corporate governance requirements.
We may also need to hire more employees in the future or engage additional outside consultants to comply with these requirements, which would increase our costs and expenses. We are a “controlled company” within the meaning of the NYSE rules and, as a result, qualify for and intend to rely on exemptions from certain corporate governance requirements.
These countries may present other risks with regard to infrastructure available to support manufacturing, labor and employee relations, political and economic stability, corruption, regulatory, environmental, health and safety compliance.
These countries may present other risks with regard to infrastructure available to support manufacturing, labor and employee relations, political and economic stability, corruption, regulatory, environmental, health and safety compliance. While we endeavor to monitor and audit facilities where our production is done, any significant events with factories we use can adversely impact our reputation, brand and product delivery.
Changes in these rules or their interpretation or changes in underlying assumptions, estimates or judgments could significantly change our reported or expected financial performance or financial condition.
Changes in these rules or their interpretation or changes in underlying assumptions, estimates or judgments could significantly change our reported or expected financial performance or financial condition. ESG matters or related incidents, including inclusion and diversity matters, our reporting of such matters, or sustainability ratings could negatively impact our business and results of operations.
(as successor to Jill Holdings LLC), Jill Acquisition LLC, a wholly-owned subsidiary of us, the various lenders party thereto and Jefferies Finance LLC as the administrative agent, as amended on May 27, 2016 by Amendment No. 1 thereto, as further amended by 18 Amendment No. 2 thereto (the “Term Loan Agreement”), our ABL credit agreement, dated as of May 8, 2015, by and among Jill Holdings, Inc.
Our priming credit agreement, dated as of September 30, 2020 (the “Priming Credit Agreement” and, such facility, the “Priming Facility”), our subordinated term loan credit agreement, dated as of September 30, 2020, by and among J.Jill, Inc., Jill Acquisition LLC, a wholly-owned subsidiary of us, the various lenders party thereto and Wilmington Trust, National 17 Association as the administrative agent (the “Subordinated Term Loan Agreement” and, such facility, the “Subordinated Term Loan Facility”), and our ABL credit agreement, dated as of May 8, 2015, by and among Jill Holdings, Inc.
Subject to the satisfaction of vesting conditions, shares registered under the registration statements on Form S-8 will be available for resale immediately in the public market without restriction. From time to time in the future, we may also issue additional shares of our common stock or securities convertible into common stock pursuant to a variety of transactions, including acquisitions.
From time to time in the future, we may register additional shares of our common stock issued or reserved for issuance to our employees, issue additional shares of our common stock or securities convertible into common stock pursuant to a variety of transactions, including acquisitions.
Risks Related to Ownership of Our Common Stock We are an “emerging growth company,” and are taking advantage of reduced disclosure requirements applicable to “emerging growth companies,” which could make our common stock less attractive to investors.
Risks Related to Ownership of Our Common Stock We are a “smaller reporting company” within the meaning of the Securities Act of 1933, as amended (the “Securities Act”) and are taking advantage of reduced disclosure requirements applicable to “smaller reporting companies,” which could make our common stock less attractive to investors and make it more difficult to compare our performance with other public companies.
Future sales of our common stock in the public market, or the perception in the public market that such sales may occur, could reduce our stock price. We have 10,001,454 outstanding shares of common stock as of January 29, 2022.
For so long as we continue to be a smaller reporting company, we intend to take advantage of these reduced disclosure obligations. 22 Future sales of our common stock in the public market, or the perception in the public market that such sales may occur, could reduce our stock price.
Goodwill and identifiable intangible assets represent a significant portion of our total assets and any impairment of these assets could adversely affect our results of operations.
Additionally, due to the Company’s revised outlook on future cash flows at certain store locations, the Company incurred noncash impairment charges of $0.8 million related primarily to leasehold improvements and furniture and fixtures at five locations. 21 Goodwill and identifiable intangible assets represent a significant portion of our total assets and any impairment of these assets could adversely affect our results of operations.
The failure of our suppliers to comply with our social compliance program requirements could have a material adverse effect on our reputation, business, financial condition and results of operations.
We and others are subject to a variety of laws, regulations, or industry standards, including with respect to cybersecurity, that may have a material adverse effect on our business, results of operations, or financial condition.
Removed
Item 1A. Risk Factors Summary Risk Factors Our business is subject to numerous risks and uncertainties, including those highlighted in the section titled “Risk Factors” immediately following this prospectus summary.
Added
Item 1A. Ri sk Factors Risks Related to Our Business and Industry Our business is sensitive to macroeconomic conditions, we rely on consumer discretionary spending and we may be adversely affected by economic downturns and other macroeconomic conditions or trends. Our business and operating results are subject to national and global economic conditions and their impact on consumer discretionary spending.
Removed
These risks include, but are not limited to, risks associated with: • the potential adverse impact of the COVID-19 pandemic on our operations, business and financial results; • our sensitivity to changes in economic conditions and discretionary consumer spending; • our inability to anticipate and respond to changing customer preferences, shifts in fashion and industry trends in a timely manner; • our inability to maintain our brand image, engage new and existing customers and gain market share; • the impact of operating in a highly competitive industry with increased competition; • our inability to successfully optimize our omnichannel operations, including failure to enhance our technology and marketing efforts; • our failure to use effective marketing strategies and increase existing and new customer traffic; • any interruptions in our foreign sourcing operations and the relationships with our suppliers and agents; • any increases in the demand for, or the price of, raw materials used to manufacture our merchandise and other fluctuations in sourcing and distribution costs; • any material damage or interruptions to our information systems; • our inability to protect our trademarks and other intellectual property rights; • our indebtedness restricting our operational and financial flexibility; • our inability to manage our inventory levels and merchandise mix; and • our status as a controlled company.
Added
Some of the factors that may negatively influence consumer spending include high levels of unemployment; higher consumer debt levels; reductions in net worth, declines in asset values, and related market and macroeconomic uncertainty; home foreclosures and reductions in home values; fluctuating interest rates, increased inflationary pressures and credit availability; rising fuel and other energy costs; rising commodity prices; and general uncertainty regarding the overall future political and economic environment.
Removed
Risks Related to Our Business and Industry The COVID-19 pandemic could have a potential adverse effect on our business, results of operations, liquidity, and business and financial results.
Added
We have experienced many of these factors, including current inflationary pressures, and are experiencing negative impacts on client demand and discretionary spending as a result. Consumer purchases of discretionary items, including the merchandise that we offer, generally decline during recessionary periods or periods of economic uncertainty, when disposable income is reduced and when there is a reduction in consumer confidence.
Removed
Our business is sensitive to economic conditions and consumer spending. We face numerous business risks relating to macroeconomic factors. The retail industry is cyclical and consumer purchases of discretionary retail items, including our merchandise, generally decline during recessionary periods and other times when disposable income is lower.
Added
Furthermore, economic conditions in certain regions may also be affected by natural disasters, such as hurricanes, tropical storms, earthquakes, and wildfires; public health crises; and other major unforeseen events. Adverse economic changes could reduce consumer confidence and could thereby negatively affect our operating results.
Removed
Factors impacting discretionary consumer spending include general economic conditions, wages and employment, consumer debt, reductions in net worth based on severe market declines, residential real estate and mortgage markets, taxation, volatility of fuel and energy prices, interest rates, consumer confidence, political and 11 economic uncertainty and other macroeconomic factors.
Added
In challenging and uncertain economic environments, we cannot predict when macroeconomic uncertainty may arise, whether or when such circumstances may improve or worsen, or what impact such circumstances could have on our business.
Removed
Deterioration in economic conditions or increasing unemployment levels may reduce the level of consumer spending and inhibit consumers’ use of credit, which may adversely affect our revenues and profits.
Added
Additionally, the ongoing volatile and uncertain macroeconomic environment that we have been experiencing since the onset of the COVID-19 pandemic has likely reduced, and may continue to reduce, our ability to forecast our future operating results. The COVID-19 pandemic may further affect our business, results of operations, liquidity, and financial results.
Removed
Our inability to enter into new leases or renew existing leases on terms acceptable to us or be released from our obligations under leases for stores that we close could have a material adverse effect on our business, financial condition and results of operations.
Added
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—General.” Our level of indebtedness could have a material adverse effect on our ability to generate sufficient cash to fulfill our obligations under such indebtedness, to react to changes in our business and to incur additional indebtedness to fund future needs.
Removed
While we endeavor to monitor and audit facilities where our production is done, any significant events with factories we use can adversely impact our reputation, brand and product delivery. 16 Furthermore, many of our suppliers rely on working capital financing to support their operations.
Added
As of January 28, 2023, we had $221.9 million aggregate principal amount of borrowings under the Credit Agreements. If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay investments and capital expenditures or to sell assets, seek additional capital or restructure or refinance our indebtedness.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe current terms of our leases expire as follows: Fiscal Years Lease Terms Expire Number of Stores 2021 – 2023 156 2024 – 2026 75 2027 – 2029 17 2030 and later 5 28 The table below sets forth the number of retail stores by state that we operated as of January 29, 2022.
Biggest changeThe current terms of our leases expire as follows: Fiscal Years Lease Terms Expire Number of Stores 2023 – 2025 138 2026 – 2028 86 2029 – 2031 17 2032 and later 2 The table below sets forth the number of retail stores by state that we operated as of January 28, 2023.
Some of the leases also contain early termination options, which can be exercised by us or the landlord under certain conditions. The leases also generally require us to pay real estate taxes, insurance and certain common area costs. We renegotiate with landlords to obtain more favorable terms as opportunities arise.
Some of the leases also contain early termination options, which can be exercised by us or the 28 landlord under certain conditions. The leases also generally require us to pay real estate taxes, insurance and certain common area costs. We renegotiate with landlords to obtain more favorable terms as opportunities arise.
Number Number Number State of Stores State of Stores State of Stores Alabama 5 Kentucky 2 New York 12 Arizona 6 Louisiana 5 North Carolina 9 Arkansas 3 Maine 1 Ohio 8 California 23 Maryland 6 Oklahoma 3 Colorado 6 Massachusetts 12 Oregon 5 Connecticut 7 Michigan 9 Pennsylvania 13 Delaware 1 Minnesota 6 Rhode Island 1 Florida 11 Mississippi 2 South Carolina 5 Georgia 10 Missouri 4 Tennessee 8 Idaho 1 Nebraska 1 Texas 15 Illinois 13 Nevada 2 Utah 2 Indiana 2 New Hampshire 1 Virginia 8 Iowa 2 New Jersey 11 Washington 5 Kansas 2 New Mexico 1 Wisconsin 4
Number Number Number State of Stores State of Stores State of Stores Alabama 5 Kentucky 2 New York 12 Arizona 5 Louisiana 5 North Carolina 9 Arkansas 3 Maine 1 Ohio 8 California 21 Maryland 6 Oklahoma 3 Colorado 5 Massachusetts 10 Oregon 5 Connecticut 6 Michigan 8 Pennsylvania 13 Delaware 1 Minnesota 6 Rhode Island 1 Florida 10 Mississippi 2 South Carolina 5 Georgia 10 Missouri 4 Tennessee 8 Idaho 1 Nebraska 1 Texas 15 Illinois 12 Nevada 2 Utah 1 Indiana 3 New Hampshire 1 Virginia 8 Iowa 2 New Jersey 11 Washington 5 Kansas 2 New Mexico 1 Wisconsin 4
The average size of our stores is approximately 3,700 square feet. All of our retail stores are leased from third parties and new stores historically have had terms of ten years. The weighted-average remaining lease term is 6 years. A portion of our leases have options to renew for periods up to five years.
The average size of our stores is approximately 3,700 square feet. All of our retail stores are leased from third parties and new stores historically have had terms of ten years. The weighted-average remaining lease term is 5.3 years. A portion of our leases have options to renew for periods up to five years.
Item 2. Properties We are headquartered in Quincy, Massachusetts. Our principal executive offices are leased under a lease agreement expiring in December 2027, with options to renew thereafter.
Item 2. Pr operties We are headquartered in Quincy, Massachusetts. Our principal executive offices are leased under a lease agreement expiring in December 2027, with options to renew thereafter.
We consider these properties to be in good condition and believe that our facilities are adequate for operations and provide sufficient capacity to meet our anticipated future requirements. As of January 29, 2022, we operated 253 stores in 42 states. Of these stores, approximately half are located in lifestyle centers and half in premium malls.
We consider these properties to be in good condition and believe that our facilities are adequate for operations and provide sufficient capacity to meet our anticipated future requirements. As of January 28, 2023, we operated 243 stores in 42 states. Of these stores, approximately half are located in lifestyle centers and half in premium malls.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 4. Mine Safety Disclosures Not applicable. 29 PART II
Biggest changeItem 4. Mine Saf ety Disclosures Not applicable. 29 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe following table sets forth the high and low sales prices of our common stock as reported on the NYSE for the Fiscal Years 2021 and 2020 quarters ended, respectively: Fiscal Year 2021 Fiscal Year 2020 High Low High Low First $ 10.77 $ 3.71 $ 6.20 $ 1.55 Second $ 24.10 $ 8.81 $ 7.80 $ 1.95 Third $ 24.50 $ 14.75 $ 5.75 $ 1.82 Fourth $ 20.89 $ 13.70 $ 8.67 $ 3.32 Holders of Record As of January 29, 2022, there were approximately 72 holders of record of our common stock.
Biggest changeThe following table sets forth the high and low sales prices of our common stock as reported on the NYSE for the Fiscal Years 2022 and 2021 quarters ended, respectively: Fiscal Year 2022 Fiscal Year 2021 High Low High Low First $ 17.00 $ 12.47 $ 10.77 $ 3.71 Second $ 20.72 $ 15.14 $ 24.10 $ 8.81 Third $ 20.80 $ 15.45 $ 24.50 $ 14.75 Fourth $ 27.52 $ 20.04 $ 20.89 $ 13.70 Holders of Record As of January 28, 2023, there were approximately 48 holders of record of our common stock.
In accordance with the terms of the penny warrants issued to the Subordinated Lenders, the number of shares of common stock issuable upon exercise of each warrant was also proportionately adjusted to give effect to the reverse stock split. Dividends Since its initial public offering, the Company has paid one cash dividend.
In accordance with the terms of the warrants issued to the Subordinated Lenders, the number of shares of common stock issuable upon exercise of each warrant was also proportionately adjusted to give effect to the reverse stock split. Dividends Since its initial public offering, the Company has paid one cash dividend.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock began trading publicly on the NYSE under the symbol “JILL” on March 9, 2017. Prior to that time, there was no public market for our common stock.
Item 5. Market for Registrant’s Common Equity, Related Stoc kholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock began trading publicly on the NYSE under the symbol “JILL” on March 9, 2017. Prior to that time, there was no public market for our common stock.
Recent Sales of Unregistered Securities On September 30, 2020, pursuant to the Priming Credit Agreement, the Company issued 656,717 shares of common stock to the Priming Credit Agreement lenders, and pursuant to the Subordinated Facility, the Company issued 3,720,109 warrants to purchase 3,720,109 shares of common stock to the Subordinated Lenders (after giving effect to the 1-for-5 stock split described herein).
Recent Sales of Unregistered Securities On September 30, 2020, pursuant to the Priming Credit Agreement, the Company issued 656,717 shares of common stock to the lenders party to the Priming Credit Agreement, and pursuant to the Subordinated Term Loan Facility, the Company issued 3,720,109 warrants to purchase 3,720,109 shares of common stock to the Subordinated Lenders (after giving effect to the 1-for-5 reverse stock split described herein).
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Credit Facilities.” 30 Performance Graph The following graph shows a comparison from March 9, 2017 (the date our common stock commenced trading on the NYSE) through January 29, 2022 of the cumulative total return for our common stock, the S&P 500 Index and an S&P Retail Index.
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—General.” 30 Performance Graph The following graph shows a comparison from March 9, 2017 (the date our common stock commenced trading on the NYSE) through January 28, 2023, of the cumulative total return for our common stock, the S&P 500 Index and an S&P Retail Index.
The payment of cash dividends in the future, if any, will be at the discretion of our board of directors and will depend upon such factors as earnings levels, capital requirements, restrictions imposed by applicable law, our overall financial condition, restrictions in our debt agreements, including our Term Loan Agreement, Priming Credit Agreement, Subordinated Facility and ABL Facility, and any other factors deemed relevant by our board of directors.
The payment of cash dividends in the future, if any, will be at the discretion of our board of directors and will depend upon such factors as earnings levels, capital requirements, restrictions imposed by applicable law, our overall financial condition, restrictions in our debt agreements, including in our Credit Agreements, and any other factors deemed relevant by our board of directors.
Securities Authorized for Issuance Under Equity Compensation Plans Information regarding our equity compensation plans is set forth in Item 12, Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters. Item 6. Selected Financial Data Not applicable. 31
Securities Authorized for Issuance Under Equity Compensation Plans Information regarding our equity compensation plans is set forth in Item 12, Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters. Item 6. [Reserved] 31
As a holding company, our ability to pay dividends depends on our receipt of cash dividends from our operating subsidiaries, which may further restrict our ability to pay dividends as a result of restrictions on their ability to pay dividends to us under our Term Loan Agreement, Priming Credit Agreement, Subordinated Facility and ABL Facility and under future indebtedness that we or they may incur.
As a holding company, our ability to pay dividends depends on our receipt of cash dividends from our operating subsidiaries, which may further restrict our ability to pay dividends as a result of restrictions on their ability to pay dividends to us under our Credit Facilities and under future indebtedness that we or they may incur.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe following table summarizes our consolidated results of operations for the periods indicated: Year Ended Change from Year Ended January 30, 2021 to the Year (in thousands) January 29, 2022 January 30, 2021 Ended January 29, 2022 Dollars % of Net Sales Dollars % of Net Sales $ Change % Change Net sales $ 585,206 100.0 % $ 426,730 100.0 % $ 158,476 37.1 % Costs of goods sold 190,770 32.6 % 181,103 42.4 % 9,667 5.3 % Gross profit 394,436 67.4 % 245,627 57.6 % 148,809 60.6 % Selling, general and administrative expenses 335,716 57.4 % 343,448 80.5 % (7,732 ) (2.3 )% Impairment of long-lived assets — — 33,777 7.9 % (33,777 ) (100.0 )% Impairment of goodwill — — 17,900 4.2 % (17,900 ) (100.0 )% Impairment of indefinite-lived intangible assets — — 14,620 3.4 % (14,620 ) (100.0 )% Operating income (loss) 58,720 10.1 % (164,118 ) (38.5 )% 222,838 (135.8 )% Fair value adjustment of derivative 2,775 0.5 % 1,005 0.2 % 1,770 176.1 % Fair value adjustment of warrants - related party 56,984 9.7 % 4,214 1.0 % 52,770 100.0 % Interest expense, net 17,057 2.9 % 17,695 4.1 % (638 ) (3.6 )% Interest expense, net - related party 2,029 0.3 % 534 0.1 % 1,495 100.0 % (Loss) income before provision (benefit) for income taxes (20,125 ) (3.4 )% (187,566 ) (44.0 )% 167,441 (89.3 )% Income tax provision (benefit) 8,018 1.4 % (48,162 ) (11.3 )% 56,180 (116.6 )% Net (loss) income $ (28,143 ) (4.8 )% $ (139,404 ) (32.7 )% $ 111,261 (79.8 )% Net Sales Net sales for Fiscal Year 2021 increased $158.5 million or 37.1%, to $585.2 million from $426.7 million for Fiscal Year 2020.
Biggest changeAlthough the stores were temporarily closed and the Company lost revenues as a result, we continued to incur certain expenses, such as payroll and rent; therefore, ratios and other items may not be comparable to our Fiscal Year 2022 and 2021 financial results. 34 Results of Operations Fiscal Year Ended January 28, 2023 compared to Fiscal Year Ended January 29, 2022 The following table summarizes our consolidated results of operations for the periods indicated: For the Fiscal Year Ended Change from Year Ended January 29, 2022 to the Year (in thousands) January 28, 2023 January 29, 2022 Ended January 28, 2023 Dollars % of Net Sales Dollars % of Net Sales $ Change % Change Net sales $ 615,268 100.0 % $ 585,206 100.0 % $ 30,062 5.1 % Costs of goods sold 193,218 31.4 % 190,770 32.6 % 2,448 1.3 % Gross profit 422,050 68.6 % 394,436 67.4 % 27,614 7.0 % Selling, general and administrative expenses 341,903 55.6 % 335,716 57.4 % 6,187 1.8 % Impairment of long-lived assets 1,413 0 % — — 1,413 100.0 % Operating income 78,734 12.8 % 58,720 10.0 % 20,014 34.1 % Fair value adjustment of derivative — — 2,775 0.5 % (2,775 ) (100.0 )% Fair value adjustment of warrants - related party — — 56,984 9.7 % (56,984 ) (100.0 )% Interest expense, net 15,946 2.6 % 17,057 2.9 % (1,111 ) (6.5 )% Interest expense, net - related party 4,114 0.7 % 2,029 0.3 % 2,085 102.8 % Income (loss) before provision for income taxes 58,674 9.5 % (20,125 ) (3.4 )% 78,799 391.5 % Income tax provision 16,499 2.7 % 8,018 1.4 % 8,481 105.8 % Net income (loss) $ 42,175 6.9 % $ (28,143 ) (4.8 )% $ 70,318 249.9 % Net Sales Net sales for Fiscal Year 2022 increased $30.1 million or 5.1%, to $615.3 million from $585.2 million for Fiscal Year 2021.
In connection with closing stores, we incur store-closing costs. Store-closing costs primarily consist of lease termination penalties and costs of transporting inventory and fixtures to other store locations. These pre-opening costs and store-closing costs are included in selling, general and administrative expenses and are generally incurred and expensed within 30 days of opening a new store or closing a store.
In connection with closing stores, we incur store-closing costs. Store-closing costs primarily consist of lease termination penalties and costs of transporting inventory and fixtures to other store locations. These pre-opening and store-closing costs are included in selling, general and administrative expenses and are generally incurred and expensed within 30 days of opening a new store or closing a store.
On May 31, 2021, the Company had the choice (the “May 31, 2021 Option”) to either (i) repay $4.9 million in aggregate principal amount of the loans under the Priming Credit Agreement, together with accrued and unpaid interest thereon or (ii) issue additional shares of Common Stock to the Priming Lenders in an amount as defined in the Agreement.
On May 31, 2021, the Company had the choice (the “May 31, 2021 Option”) to either (i) repay $4.9 million in aggregate principal amount of the loans under the Priming Credit Agreement, together with accrued and unpaid interest thereon or (ii) issue additional shares of Common Stock to the Priming Lenders in an amount as defined in the Priming Credit Agreement.
(d) Represents non-cash gains associated with exiting store leases earlier than anticipated. (e) Represents impairment of long-lived assets related to the right-of-use asset and leasehold improvements. (f) Represents items management believes are not indicative of ongoing operating performance. In Fiscal Year 2020, these expenses are primarily composed of legal and advisory costs.
(d) Represents non-cash gains associated with exiting store leases earlier than anticipated. (e) Represents impairment of long-lived assets related primarily to the right-of-use assets and leasehold improvements. (f) Represents items management believes are not indicative of ongoing operating performance. In Fiscal Year 2020, these expenses are primarily composed of legal and advisory costs.
On May 31, 2021, the Company had the choice to either (i) repay $4.9 million in aggregate principal amount of the loans under the Priming Credit Agreement, together with accrued and unpaid interest thereon or (ii) issue additional shares of Common Stock to the Priming Lenders in an amount as defined in the Agreement.
On May 31, 2021, the Company had the choice to either (i) repay $4.9 million in aggregate principal amount of the loans under the Priming Credit Agreement, together with accrued and unpaid interest thereon or (ii) issue additional shares of Common Stock to the lenders party to the Priming Credit Agreement in an amount as defined in the Agreement.
The Priming Credit Agreement required a principal paydown of at least $25.0 million by August 30, 2021; otherwise, there would 38 be a Paid-in-Kind (“PIK”) interest rate increase and a PIK fee . On August 27 , 2021, the Company made the principal paydown of $25.0 million to avoid additional PIK and interest fees .
The Priming Credit Agreement required a principal paydown of at least $25.0 million by August 30, 2021; otherwise, there would be a Paid-in-Kind (“PIK”) interest rate increase and a PIK fee. On August 27, 2021, the Company made the principal paydown of $25.0 million to avoid additional PIK and interest fees.
Net cash used in financing activities during Fiscal Year 2021 was $38.0 million, which was driven by the $25.0 million voluntary principal payment on the Priming Loan, which was made to avoid increased PIK interest and fees, and net payments of $11.1 million on the ABL Facility.
Net cash used in financing activities during Fiscal Year 2021 was $38.0 million, which was driven by the $25.0 million voluntary principal payment on the Priming Facility, which was made to avoid increased PIK interest and fees, and net payments of $11.1 million on the ABL Facility.
Net sales also include shipping and handling fees collected from customers and royalty revenues and marketing reimbursements related to our private label credit card agreement. Revenue from our Retail channel is recognized at the time of sale and revenue from our Direct channel is recognized upon shipment of merchandise to the customer.
Net sales also include shipping and handling fees collected from customers, and royalty revenues and marketing reimbursements related to our private label credit card agreement. Retail revenue is recognized at the time of sale and Direct revenue is recognized upon shipment of merchandise to the customer.
We review our inventory levels on an ongoing basis to identify slow-moving merchandise and use product markdowns to liquidate these products. Changes in the assortment of our products may also impact our gross profit. The timing and level of markdowns are driven by customer acceptance of our merchandise.
We review our inventory levels on an ongoing basis to identify slow-moving merchandise and use markdowns to liquidate these products. Changes in the assortment of our products may also impact our gross profit. The timing and level of markdowns are driven by customer acceptance of our merchandise.
These expenses also include marketing expense, including catalog production and mailing costs, warehousing, distribution and shipping costs, customer service operations, consulting and software services, professional services and other administrative costs. Additionally, our shipping costs may fluctuate due to surcharges from shipping vendors based on demand for shipping services.
These expenses also include marketing expense, including catalog production and mailing costs, warehousing, distribution and outbound shipping costs, customer service operations, consulting and software services, professional services and other administrative costs. Additionally, our outbound shipping costs may fluctuate due to surcharges from shipping vendors based on demand for shipping services.
As a holding company, our ability to pay dividends depends on our receipt of cash dividends from our operating subsidiaries, which may further restrict our ability to pay dividends as a result of restrictions on their ability to pay dividends to us under our debt agreements and under future indebtedness that we or they may incur.
As a holding company, our ability to pay dividends depends on our receipt of cash dividends from our operating subsidiaries, which may 37 further restrict our ability to pay dividends as a result of restrictions on their ability to pay dividends to us under our debt agreements and under future indebtedness that we or they may incur.
Gross profit is equal to our net sales less costs of goods sold. Gross profit as a percentage of our net sales is referred to as gross margin. Costs of goods sold (“COGS”) includes the direct costs of sold merchandise, inventory shrinkage, and adjustments and reserves for excess, aged and obsolete inventory.
Gross profit is equal to our net sales less costs of goods sold. Gross profit as a percentage of our net sales is referred to as gross margin. 32 Costs of goods sold (“COGS”) includes the direct costs of sold merchandise, inventory shrinkage, and adjustments and reserves for excess, aged and obsolete inventory.
The ABL Facility allows us to elect, at our own option, the applicable interest rate for borrowings under the ABL Facility using a LIBOR or Base Rate variable interest rate plus an applicable margin. LIBOR loans under the ABL Facility accrue interest at a rate equal to LIBOR plus a spread ranging from 2.25% to 2.50%, subject to availability.
The ABL Facility allows us to elect, at our own option, the applicable interest rate for borrowings under the ABL Facility using a SOFR or Base Rate variable interest rate plus an applicable margin. SOFR loans under the ABL Facility accrue interest at a rate equal to SOFR plus a spread ranging from 2.25% to 2.50%, subject to availability.
The most significant estimates and assumptions inherent in this approach are the preparation of revenue forecasts, selection of the royalty and discount rates, and selection of the terminal year multiple. We did not record any impairment losses related to the trade name during Fiscal Year 2021.
The most significant estimates and assumptions inherent in this approach are the preparation of revenue forecasts, selection of the royalty and discount rates, and selection of the terminal year multiple. 40 We did not record any impairment losses related to the trade name during Fiscal Year 2022 and 2021.
If the carrying amount exceeds the reporting unit’s fair value, a goodwill impairment charge is recognized for the amount in excess, not to exceed the total amount of goodwill allocated to that reporting unit. During Fiscal Year 2021, we did not record any impairment to our goodwill.
If the carrying amount exceeds the reporting unit’s fair value, a goodwill impairment charge is recognized for the amount in excess, not to exceed the total amount of goodwill allocated to that reporting unit. During Fiscal Year 2022 and 2021, we did not record any impairment to our goodwill.
Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause such differences are discussed in the sections of this Annual Report on Form 10-K titled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements.” We operate on a 52- or 53-week fiscal year that ends on the Saturday that is closest to January 31.
Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause such differences are discussed in the sections of this Annual Report titled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements.” We operate on a 52- or 53-week fiscal year that ends on the Saturday that is closest to January 31.
The discussion that follows includes a comparison of our results of operations and liquidity and capital resources for Fiscal Years 2021 and 2020. For the discussion comparing the Fiscal Years 2020 and 2019, refer to Part II, Item 7.
The discussion that follows includes a comparison of our results of operations and liquidity and capital resources for Fiscal Years 2022 and 2021. For the discussion comparing the Fiscal Years 2021 and 2020, refer to Part II, Item 7.
Pre-opening costs include expenses incurred prior to opening a new store and primarily consist of payroll, travel, training, marketing, initial opening supplies and costs of transporting initial inventory and fixtures to store locations, as well as occupancy costs incurred from the time of possession of a store site to the opening of that store.
Pre-opening costs include expenses incurred prior to opening a new store and primarily consist of payroll, travel, training, marketing, initial opening supplies and costs of transporting initial inventory and fixtures to retail stores, as well as occupancy costs incurred from the time of possession of a store site to the opening of that store.
Refer to Note 14 to the consolidated financial statements for additional income tax information. The Company paid $9.3 million in cash for income taxes during Fiscal Year 2021 and received a tax refund of approximately $17.5 million relating to prior years.
Income Taxes to the consolidated financial statements for additional income tax information. The Company paid $9.3 million in cash for income taxes during Fiscal Year 2021 and received a tax refund of approximately $17.5 million relating to prior years.
The Priming Credit Agreement includes customary negative covenants, including covenants limiting the ability of the Company to, among other things, incur additional indebtedness, create liens on assets, make investments, loans or advances, engage in mergers, consolidations, sales of assets and purchases, pay dividends and distributions, enter into transactions with affiliates, and make payments in respect of junior indebtedness.
The Credit Agreements include customary negative covenants, including covenants limiting the ability of the Company to, among other things, incur additional indebtedness, create liens on assets, make investments, loans or advances, engage in mergers, consolidations, sales of assets and purchases, pay dividends and distributions, enter into transactions with affiliates, and make payments in respect of junior indebtedness.
Critical Accounting Policies and Significant Estimates Our discussion of results of operations and financial condition is based upon the consolidated financial statements included elsewhere in this Annual Report on Form 10-K, which have been prepared in accordance with GAAP.
Critical Accounting Policies and Significant Estimates Our discussion of results of operations and financial condition is based upon the consolidated financial statements included elsewhere in this Annual Report, which have been prepared in accordance with GAAP.
The effective tax rate during Fiscal Year 2021 differs from the federal statutory rate of 21.0% due primarily to the impacts of (i) nondeductible fair value adjustments of the warrants and derivative, (ii) state and local income taxes, (iii) executive compensation limitations, and (iv) valuation allowance adjustments related to state and local income taxes.
The effective tax rate for Fiscal Year 2021 differs from the federal statutory rate of 21.0% due primarily to the impacts of (i) nondeductible fair value adjustments of the warrants and derivative, (ii) state and local income taxes, (iii) executive compensation limitations, and (iv) valuation allowance adjustments related to state and local income taxes. Refer to Note 13.
Adjusted EBITDA, represents net (loss) income plus net interest expense, provision (benefit) for income taxes, depreciation and amortization, equity-based compensation expense, goodwill and indefinite-lived intangible assets impairment, w rite-off of property and equipment, fair value adjustments, and ot her non-recurring expenses, primarily consisting of outside legal and professional fees associated with certain non-recurring transactions and events.
Adjusted EBITDA, represents net income (loss) plus net interest expense, provision (benefit) for income taxes, depreciation and amortization, equity-based compensation expense, goodwill and indefinite-lived intangible assets impairment, write-off of property and equipment, fair value adjustments, and other non-recurring expenses, primarily consisting of outside legal and professional fees associated with certain non-recurring transactions and events.
During Fiscal Years 2020 and 2019, we performed quantitative assessments which resulted in goodwill impairment of $17.9 million and $119.4 million, respectively. This analysis contains uncertainties because it requires us to make assumptions and to apply judgments to estimate industry economic factors and the profitability of future business strategies.
During Fiscal Year 2020, we performed quantitative assessments which resulted in goodwill impairment of $17.9 million. This analysis contains uncertainties because it requires us to make assumptions and to apply judgments to estimate industry economic factors and the profitability of future business strategies.
Proceeds from the sale of gift cards are recorded as a contract liability until the customer redeems the gift card or when the likelihood of redemption is remote. Based on historical experience, the Company estimates the value of outstanding gift cards that will ultimately not be redeemed (“gift card breakage”) and will not be escheated under statutory unclaimed property laws.
Proceeds from the sale of gift cards are recorded as a contract liability until the customer redeems the gift card or when the likelihood of redemption is remote. Based on historical experience, the Company estimates the value of gift card breakage and will not be escheated under statutory unclaimed property laws.
Each fiscal year generally is comprised of four 13-week fiscal quarters, although in the years with 53 weeks, the fourth quarter represents a 14-week period. The fiscal year ended January 29, 2022(“Fiscal Year 2021”), fiscal year ended January 30, 2021 (“Fiscal Year 2020”) and fiscal year ended February 1, 2020 (“Fiscal Year 2019”) are all comprised of 52 weeks.
Each fiscal year generally is comprised of four 13-week fiscal quarters, although in the years with 53 weeks, the fourth quarter represents a 14-week period. The fiscal year ended January 28, 2023 (“Fiscal Year 2022”), fiscal year ended January 29, 2022 (“Fiscal Year 2021”) and fiscal year ended January 30, 2021 (“Fiscal Year 2020”) are all comprised of 52 weeks.
The maturity date of the Priming Credit Agreement is May 8, 2024, and the loans under the Priming Credit Agreement bear interest at the Company’s election at: (1) Base Rate (as defined in the Priming Credit Agreement) plus 4.00% or (2) LIBOR plus 5.00%, with a minimum LIBOR per annum of 1.00%, with the interest payable on a quarterly basis.
The loans under the Priming Credit Agreement bear interest at the Company’s election at: (1) Base Rate (as defined in the Priming Credit Agreement) plus 4.00% or (2) LIBOR plus 5.00%, with a minimum LIBOR per annum of 1.00%, with the interest payable on a quarterly basis.
Management believes the estimates and judgments most critical to the preparation of our consolidated financial statements and to the understanding of our reported financial results include those made in connection with revenue recognition, including accounting for gift card breakage and estimated merchandise returns; estimating the value of inventory; and impairment assessments for goodwill and other indefinite-lived intangible assets, and long-lived assets.
Management believes the estimates and judgments most critical to the preparation of our consolidated financial statements and to the understanding of our reported financial results include those made in connection with revenue recognition, including accounting for outstanding gift cards that will ultimately not be redeemed (“gift card breakage”) and estimated merchandise returns; estimating the value of inventory; and impairment assessments for goodwill and other indefinite-lived intangible assets, and long-lived assets.
Net Cash used in Investing Activities Net cash used in investing activities during Fiscal Year 2021 was $5.5 million, an increase of $1.7 million as compared to Fiscal Year 2020, representing purchases of property and equipment related investments in stores and information systems.
Net Cash used in Investing Activities Net cash used in investing activities during Fiscal Year 2022 was $15.1 million, an increase of $9.6 million as compared to Fiscal Year 2021, representing purchases of property and equipment related investments in stores and information systems.
Our Retail channel was responsible for 50.2% of our net sales in Fiscal Year 2021 and 34.5% in Fiscal Year 2020. We operated 253 and 267 retail stores at the end of these same periods, respectively.
Our Retail channel was responsible for 53.2% of our net sales in Fiscal Year 2022 and 50.2% in Fiscal Year 2021. We operated 243 and 253 retail stores at the end of these same periods, respectively.
On May 31, 2021, the Company chose to issue 272,097 shares to the Priming Lenders, with a value of approximately $5.2 million (based on the value of those shares as of close on that date), rather than repaying the $4.9 million since the minimum liquidity covenant would have increased to $25.0 million from $15.0 million if the Company had chosen to repay the $4.9 million of principal.
On May 31, 2021, the Company chose to issue 272,097 shares to the Priming Lenders, with a value of approximately $5.2 million (based on the value of those shares as of close on that date), rather than repaying the $4.9 million since the minimum liquidity covenant would have increased to $25.0 million from $15.0 million if the Company had chosen to repay the $4.9 million of principal. 36 In addition, the Priming Credit Agreement provided for a principal paydown of at least $25.0 million by August 30, 2021.
(g) Represents items management believes are not indicative of ongoing operating performance. In Fiscal Years 2021 and 2020, these expenses are primarily composed of incremental one-time costs related to COVID-19.
(g) Represents items management believes are not indicative of ongoing operating performance. In Fiscal Years 2021 and 2020, these expenses are primarily composed of incremental one-time costs related to COVID-19. Items Affecting the Comparability of our Results of Operations Impairment losses.
Loans under the Subordinated Facility bear interest at the Borrower’s election at (1) Base Rate (as defined in the Subordinated Facility) plus 11.00% or (2) LIBOR plus 12.00%, with a minimum LIBOR per annum of 1.00%.
The maturity date of the Subordinated Term Loan Facility is November 8, 2024. Loans under the Subordinated Term Loan Facility bear interest at the Borrower’s election at (1) Base Rate (as defined in the Subordinated Term Loan Facility) plus 11.00% or (2) LIBOR plus 12.00%, with a minimum LIBOR per annum of 1.00%.
On May 31, 2021, and within the terms of the Priming Loan, the Company chose to issue 272,097 additional shares of Common Stock to the Priming Lenders with a value of approximately $5.2 million (based on the value of those shares as of close on that date). The maturity date of the Subordinated Facility is November 8, 2024.
On May 31, 2021, and within the terms of the Priming Facility, the Company chose to issue 272,097 additional shares of Common Stock to the lenders party to the Priming Credit Agreement with a value of approximately $5.2 million (based on the value of those shares as of close on that date).
In Fiscal Years 2020 and 2019, we determined that impairment losses of $12.0 million and $12.1 million, respectively, were required. This analysis contains uncertainties because it requires us to make assumptions and to apply judgments to estimate industry economic factors and the profitability of future business strategies.
In Fiscal Year 2020, we determined that an impairment loss of $12.0 million was required. This analysis contains uncertainties because it requires us to make assumptions and to apply judgments to estimate industry economic factors and the profitability of future business strategies.
Effective May 31, 2021, these liabilities were reclassified to equity because from that date they can only be settled by exercise of the warrants into common stock. Our Fiscal Year 2021 results include fair value adjustments totaling $59.8 million. Our Fiscal Year 2020 results include fair value adjustments totaling $5.2 million.
These fair value adjustments were due to the increase in J.Jill’s stock price from January 30, 2021 through May 31, 2021. Effective May 31, 2021, these liabilities were reclassified to equity because from that date they can only be settled by exercise of the warrants into common stock. Our Fiscal Year 2021 results include fair value adjustments totaling $59.8 million.
How We Assess the Performance of Our Business In assessing the performance of our business, we consider a variety of financial and operating metrics, including GAAP and non-GAAP measures, including the following: Net sales consist primarily of revenues, net of merchandise returns and discounts, generated from the sale of apparel and accessory merchandise through our Retail channel and Direct channel.
How We Assess the Performance of Our Business In assessing the performance of our business, we consider a variety of financial and operating metrics, including accounting principles generally accepted in the United States of America (“GAAP”) and non-GAAP measures, such as: Net sales consist primarily of revenues, net of merchandise returns and discounts, generated from the sale of apparel and accessory merchandise through our Retail and Direct channels.
Selling, general and administrative expenses include all operating costs not included in costs of goods sold. These expenses include all payroll and related expenses, occupancy costs, information systems costs and other operating expenses related to our stores and to our operations at our headquarters, including utilities, depreciation and amortization.
These expenses include all payroll and related expenses, occupancy costs, information systems costs and other operating expenses related to our stores and to our operations at our headquarters, including utilities, depreciation and amortization.
Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis should be read in conjunction with our consolidated financial statements and related notes thereto included elsewhere in this Annual Report on Form 10-K, as well as the information presented under “Selected Financial Data.” The following discussion contains forward-looking statements that reflect our plans, estimates and assumptions.
Item 7. Management’s Discussion and Analysis o f Financial Condition and Results of Operations The following discussion and analysis should be read in conjunction with our consolidated financial statements and related notes thereto included elsewhere in this Annual Report. The following discussion contains forward-looking statements that reflect our plans, estimates and assumptions.
The customer list impairment is recorded in impairment of intangible assets in the consolidated statement of operations and comprehensive income. We did not record any impairments of intangible assets during the Fiscal Year 2021. During Fiscal Year 2021, we did not record any impairments related to right-of-use assets and leasehold improvements.
The customer list impairment is recorded in impairment of intangible assets in the consolidated statement of operations and comprehensive income. We did not record any impairments of intangible assets during Fiscal Year 2022 and 2021. During Fiscal Year 2022, we assessed the carrying values of right-of-use assets and property and equipment as described above.
Reconciliation of Net Loss to Adjusted EBITDA and Calculation of Adjusted EBITDA Margin The following table provides a reconciliation of net loss to Adjusted EBITDA and the calculation of Adjusted EBITDA margin for the periods presented: Year Ended (in thousands) January 29, 2022 January 30, 2021 February 1, 2020 Statements of Operations Data: Net loss $ (28,143 ) $ (139,404 ) $ (128,567 ) Fair value adjustment of derivative 2,775 1,005 — Fair value adjustment of warrants - related party (a) 56,984 4,214 — Interest expense, net 17,057 17,695 19,571 Interest expense, net - related party 2,029 534 — Income tax provision (benefit) 8,018 (48,162 ) (3,022 ) Depreciation and amortization 29,258 33,696 37,925 Equity-based compensation expense (b) 2,610 2,160 3,972 Write-off of property and equipment (c) 940 969 151 Impairment of goodwill and intangible assets — 32,520 131,528 Adjustment for exited retail stores (d) (1,755 ) (1,444 ) — Impairment of long-lived assets (e) — 33,777 2,325 Transaction costs (f) — 21,914 — Other non-recurring items (g) 2,013 2,820 1,597 Adjusted EBITDA $ 91,786 $ (37,706 ) $ 65,480 Net sales $ 585,206 $ 426,730 $ 691,345 Adjusted EBITDA margin 15.7 % (8.8 )% 9.5 % (a) The fair value adjustment of warrants increased due to the increase in J.Jill’s stock price since January 30, 2021.
We recommend that you review the reconciliation of Adjusted EBITDA to net income, the most directly comparable GAAP financial measure, and the calculation of the resultant Adjusted EBITDA margin below and not rely solely on Adjusted EBITDA or any single financial measure to evaluate our business. 33 Reconciliation of Net Income (Loss) to Adjusted EBITDA and Calculation of Adjusted EBITDA Margin The following table provides a reconciliation of net income (loss) to Adjusted EBITDA and the calculation of Adjusted EBITDA margin for the periods presented: For the Fiscal Year Ended (in thousands) January 28, 2023 January 29, 2022 January 30, 2021 Statements of Operations Data: Net income (loss) $ 42,175 $ (28,143 ) $ (139,404 ) Fair value adjustment of derivative — 2,775 1,005 Fair value adjustment of warrants - related party (a) — 56,984 4,214 Interest expense, net 15,946 17,057 17,695 Interest expense, net - related party 4,114 2,029 534 Income tax provision (benefit) 16,499 8,018 (48,162 ) Depreciation and amortization 25,761 29,258 33,696 Equity-based compensation expense (b) 3,505 2,610 2,160 Write-off of property and equipment (c) 267 940 969 Impairment of goodwill and intangible assets — — 32,520 Adjustment for exited retail stores (d) (250 ) (1,755 ) (1,444 ) Impairment of long-lived assets (e) 1,413 — 33,777 Transaction costs (f) — — 21,914 Other non-recurring items (g) 7 2,013 2,820 Adjusted EBITDA $ 109,437 $ 91,786 $ (37,706 ) Net sales $ 615,268 $ 585,206 $ 426,730 Adjusted EBITDA margin 17.8 % 15.7 % (8.8 )% (a) The fair value adjustment of warrants increased due to the increase in J.Jill’s stock price since January 30, 2021.
In addition, the Priming Credit Agreement provided for a principal paydown of at least $25.0 million by August 30, 2021. The principal payment of $25.0 million, which was generated by operating cash flows, was made on August 27, 2021, avoiding additional PIK interest and fees.
The principal payment of $25.0 million, which was generated by operating cash flows, was made on August 27, 2021, avoiding additional PIK interest and fees.
Base Rate loans under the ABL Facility accrue interest at a rate equal to (i) the highest of (a) the prime rate, (b) the overnight Federal Funds Effective Rate plus 0.50%, (c) LIBOR with a one-month interest period plus 1.00% and (d) 2.00%, plus (ii) a spread ranging from 1.25% to 1.50%, subject to availability.
Base Rate loans under the ABL Facility accrue interest at a rate equal to (i) the highest of (a) the prime rate, (b) the overnight Federal Funds Effective Rate plus 0.50%, (c) most recently available Adjusted SOFR (as adjusted by any Floor) plus 1% (ii) a spread ranging from 1.25% to 1.50%, subject to availability.
During Fiscal Years 2020 and 2019, we assessed the carrying values of right-of-use assets and property and equipment as described above. During Fiscal Year 2020, the Company recorded impairment charges of $23.0 million and $10.8 million related to right-of-use assets and leasehold improvements, respectively, associated with the assets of underperforming retail locations.
During Fiscal Year 2021, we did not record any impairments related to right-of-use assets and leasehold improvements. During Fiscal Year 2020, the Company recorded impairment charges of $23.0 million and $10.8 million related to right-of-use assets and leasehold improvements, respectively, associated with the assets of underperforming retail locations.
Revenue also includes shipping and handling fees collected from customers. The criteria to recognize revenue is met when control of the promised goods or services are transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services.
The Company recognizes revenue when its single performance obligation is met at the time when the control of the promised goods or services are transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services.
Gross Profit and Cost of Goods Sold Gross profit for Fiscal Year 2021 increased $148.8 million, or 60.6%, to $394.4 million from $245.6 million for Fiscal Year 2020.
Gross Profit and Cost of Goods Sold Gross profit for Fiscal Year 2022 increased $27.6 million, or 7.0%, to $422.1 million from $394.4 million for Fiscal Year 2021.
We believe our sources of liquidity, namely operating cash flows and credit facility capacity will continue to be adequate to meet our contractual obligations, working capital and capital expenditure requirements, finance anticipated expansion and strategic initiatives, and fund debt maturities for the foreseeable future. Off Balance Sheet Arrangements We are not a party to any off balance sheet arrangements.
The notes to the financial statements included elsewhere in this Annual Report provide additional information. 38 We believe our sources of liquidity, namely operating cash flows and credit facility capacity will continue to be adequate to meet our contractual obligations, working capital and capital expenditure requirements, finance anticipated expansion and strategic initiatives, and fund debt maturities for the foreseeable future.
Recent Accounting Pronouncements See Note 3 to our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K for information regarding recently issued accounting pronouncements. 42
Accounting Standards to our audited consolidated financial statements included elsewhere in this Annual Report for information regarding recently issued accounting pronouncements. 41
Cash Flow Analysis The following table shows our cash flows information for the periods presented: Year Ended (in thousands) January 29, 2022 January 30, 2021 February 1, 2020 Net cash provided by (used in) operating activities $ 74,999 $ (34,811 ) $ 32,653 Net cash used in investing activities (5,474 ) (3,805 ) (18,222 ) Net cash (used in) provided by financing activities (37,975 ) 21,496 (59,108 ) Net Cash provided by (used in) by Operating Activities Net cash provided by operating activities during Fiscal Year 2021 increased $109.8 million as compared to Fiscal Year 2020 primarily due to cash generated from operating income as compared to cash being used by an operating loss during the prior year.
Cash Flow Analysis The following table shows our cash flows information for the periods presented: For the Fiscal Year Ended (in thousands) January 28, 2023 January 29, 2022 January 30, 2021 Net cash provided by (used in) operating activities $ 74,425 $ 74,999 $ (34,811 ) Net cash used in investing activities (15,067 ) (5,474 ) (3,805 ) Net cash (used in) provided by financing activities (8,262 ) (37,975 ) 21,496 Net Cash provided by Operating Activities Net cash provided by operating activities during Fiscal Year 2022 decreased $0.6 million as compared to Fiscal Year 2021.
The primary drivers of the costs of goods sold are raw materials, which fluctuate based on certain factors beyond our control, including labor conditions, transportation or freight costs, energy prices, currency fluctuations and commodity prices. We place orders with merchandise suppliers in United States dollars and, as a result, are not exposed to significant foreign currency exchange risk.
These costs fluctuate based on certain factors beyond our control, including labor conditions, inbound transportation or freight costs, energy prices, currency fluctuations and commodity prices. We place orders with merchandise suppliers in U.S. dollars and, as a result, are not exposed to significant foreign currency exchange risk. Selling, general and administrative expenses include all operating costs not included in COGS.
We have not made significant changes to our assumptions during the periods presented in our consolidated financial statements included elsewhere in this Annual Report on Form 10-K, and estimates have not varied significantly from historically recorded amounts.
Accordingly, estimates of future sales prices require management judgment based on historical experience, assessment of current conditions and assumptions about future transactions. We have not made significant changes to our assumptions during the periods presented in our consolidated financial statements included elsewhere in this Annual Report, and estimates have not varied significantly from historically recorded amounts.
Our historical revenue growth has been accompanied by increased selling, general and administrative expenses. The most significant increases were in occupancy costs associated with retail store expansion, and in marketing and payroll investments. 33 Adjusted EBITDA and Adjusted EBITDA Margin .
Our historical revenue growth has been accompanied by increased selling, general and administrative expenses. The most significant increases were in marketing and payroll investments. Adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”) and Adjusted EBITDA Margin .
Long-lived assets obtained in a business combination are recorded at the acquisition-date fair value, property and equipment purchased in the normal course of business is recorded at cost and operating lease assets are recorded at the present value of the lease payments. 41 We assess the carrying value of long-lived assets for potential impairment whenever indicators exist that the carrying value of an asset group might not be recoverable.
Long-lived assets obtained in a business combination are recorded at the acquisition-date fair value, property and equipment purchased in the normal course of business is recorded at cost and operating lease assets are recorded at the present value of the lease payments.
Changes in assumptions and estimates used in the impairment analysis, or future results that vary from assumptions used in the analysis, could affect the estimated fair value of long-lived intangible assets and could result in impairment charges in a future period. Jumpstart Our Business Startups Act of 2012 (JOBS Act) In April 2012, the JOBS Act was signed into law.
Changes in assumptions and estimates used in the impairment analysis, or future results that vary from assumptions used in the analysis, could affect the estimated fair value of long-lived intangible assets and could result in impairment charges in a future period. Recent Accounting Pronouncements See Note 3.
Net sales are impacted by the size of our active customer base, product assortment and availability, marketing and promotional activities and the spending habits of our customers.
Net sales are impacted by the size of our active customer base, product assortment and availability, marketing and promotional activities and the spending habits of our customers. Net sales are also impacted by the migration of single-channel customers to omnichannel customers who, on average, spend three times more than single-channel customers.
T he Company had outstanding letters of credit in the amount of $4.5 million and had a maximum additional borrowing capacity of $22.6 million a s of January 29, 2022. The Company was in compliance with all debt covenants as of January 29, 2022. The maturity date of the Amended Existing Term Loan Agreement is May 8, 2022.
The Company had outstanding letters of credit in the amount of $7.0 million and had a maximum additional borrowing capacity of $30.0 million as of January 28, 2023. The Company was in compliance with all debt covenants as of January 28, 2023. The maturity date of the Priming Credit Agreement is May 8, 2024.
During Fiscal Year 2019, the Company recorded impairment charges of $2.0 million and $0.3 million related to right-of-use assets and leasehold improvements, respectively. Right-of-use asset and leasehold improvement impairments are recorded in impairment of long-lived assets in the consolidated statement of operations and comprehensive income.
Right-of-use asset and leasehold improvement impairments are recorded in impairment of long-lived assets in the consolidated statement of operations and comprehensive income.
Net Cash used in (provided by) Financing Activities Net cash used in financing activities during Fiscal Year 2021 increased as compared to the prior year as net borrowings under the ABL Facility were reduced due to the lessened impact of the COVID-19 pandemic and a voluntary principal payment on the Priming Loan.
Net Cash used in Financing Activities Net cash used in financing activities during Fiscal Year 2022 decreased as compared to the prior year due to a voluntary principal payment on the Priming Facility and net repayments on the ABL Facility in Fiscal Year 2021.
Merchandise Inventory Inventory consists of finished goods merchandise held for sale to our customers. Inventory is stated at the lower of cost or net realizable value. Cost is calculated using the weighted average method of accounting, and includes the cost to purchase merchandise from our manufacturers, duties, commissions and inbound freight.
Merchandise Inventory Inventory consists of finished goods merchandise held for sale to our customers. Inventory is stated at the lower of cost or net realizable value.
In the normal course of business, we record inventory reserves by applying estimates, based on past and projected sales performance, to the inventory on hand. The carrying value of inventory is reduced to estimated net realizable value when factors indicate that merchandise will not be sold on terms sufficient to recover its cost.
The carrying value of inventory is reduced to estimated net realizable value when factors indicate that merchandise will not be sold on terms sufficient to recover its cost. We monitor inventory levels, sales trends and sales forecasts to estimate and record reserves for excess, slow-moving and obsolete inventory.
As of January 29, 2022, we had $36.0 million in cash and $22.6 million of total availability under our ABL Facility. Also, we have filed our federal income tax return for Fiscal Year 2020 and have received $17.5 million of a total expected refund of approximately $25.0 million.
As of January 28, 2023, we had $87.1 million in cash and cash equivalents and $30.0 million of total availability under our $40.0 million ABL Facility. Also, in Fiscal Year 2021, we received $17.5 million of a total expected federal income tax refund of approximately $26.7 million related to Fiscal Year 2020.
Selling, General and Administrative Expenses Selling, general and administrative expenses for Fiscal Year 2021 decreased $7.7 million, or 2.3%, to $335.7 million from $343.4 million for Fiscal Year 2020.
Selling, General and Administrative Expenses Selling, general and administrative expenses for Fiscal Year 2022 increased $6.2 million, or 1.8%, to $341.9 million from $335.7 million for Fiscal Year 2021.
The effective tax rate for Fiscal Year 2020 differs from the federal statutory rate of 21% due primarily to the impacts of (i) a realized benefit from the CARES Act, (ii) state and local income taxes, (iii) nondeductible goodwill impairment charge, and (iv) valuation allowance adjustments related to state and local income taxes.
The effective tax rate during Fiscal Year 2022 differs from the federal statutory rate of 21.0% due primarily to the impacts of (i) state and local income taxes, (ii) executive compensation limitations, (iii) valuation allowance changes, and(iv) tax return to provision adjustments.
Our Fiscal Year 2020 results include impairment charges of $66.3 million for long-lived assets (operating lease right-of-use asset and leasehold improvements), goodwill and intangible assets. See Note 7, Property and Equipment , in the footnotes to the financial statements, for additional information on these impairment losses. Fair value adjustments.
Our Fiscal Year 2022 and 2020 results include impairment charges of $1.4 million for long-lived assets (operating lease right-of-use asset, leasehold improvements and furniture, fixtures and equipment) and $66.3 million for long-lived assets (operating lease right-of-use asset and leasehold improvements), goodwill and intangible assets, respectively. See Note 6. Goodwill and Other Intangible Assets and Note 7.
Such obligations include merchandise inventories, marketing, including catalog production and distribution, payroll, store occupancy costs and capital expenditures associated with opening new stores, remodeling existing stores and upgrading information systems. The Notes to the Consolidated Financial Statements provide additional information.
Future Cash Requirements We enter into contractual obligations in the ordinary course of business that may require future cash payments. Such obligations include merchandise inventories, marketing, including catalog production and distribution, payroll, store occupancy costs and capital expenditures associated with opening new stores, remodeling existing stores and upgrading information systems.
We monitor inventory levels, sales trends and sales forecasts to estimate and record reserves for excess, slow-moving and obsolete inventory. We utilize internal channels, including sales catalogs, the internet, and price reductions in retail and outlet stores to liquidate excess inventory. In some cases, external channels such as inventory liquidators are utilized.
We utilize internal channels, including sales catalogs, the internet, and price reductions in retail and outlet stores to liquidate excess inventory. In some cases, external channels such as inventory liquidators are utilized. The prices obtained through these off-price selling methods vary based on many factors.
Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Fiscal 2020 Form 10-K, which was filed with the United States Securities and Exchange Commission on April 12, 2021. Overview J.Jill is a premier omnichannel retailer and nationally recognized women’s apparel brand committed to delighting customers with great wear-now product.
Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Fiscal Year 2021 Form 10-K, which was filed with the United States Securities and Exchange Commission on April 13, 2022. Overview J.Jill is a national lifestyle brand that provides apparel, footwear and accessories designed to help its customers move through a full life with ease.
Examples of impairment indicators that would trigger an impairment assessment of goodwill between annual evaluations include, among others, macro-economic conditions, competitive environment, industry conditions, changes in our profitability and cash flows, and changes in sales trends or customer demand. 40 We may assess our goodwill for impairment initially using a qualitative approach to determine whether conditions exist to indicate that it is more likely than not that the fair value of a reporting unit is less than its carrying value.
We may assess our goodwill for impairment initially using a qualitative approach to determine whether conditions exist to indicate that it is more likely than not that the fair value of a reporting unit is less than its carrying value.
Capitalization At January 29, 2022, long-term debt consisted of the following: Carrying Value of Debt January 29, 2022 Term Loan (principal of $4,963) $ 4,953 Priming Loan (principal of $203,403) 199,250 Subordinated Facility (principal and paid-in kind interest of $17,644) 5,605 Less: Current portion (7,692 ) Net long-term debt $ 202,116 The Company had no short-term borrowings under the Company’s ABL Facility as of January 29, 2022.
Capitalization At January 28, 2023, long-term debt consisted of the following: Carrying Value of Debt January 28, 2023 Priming Facility (principal of $201,349) 198,941 Subordinated Term Loan Facility (principal and paid-in kind interest of $20,548) 9,719 Less: Current portion (3,424 ) Net long-term debt $ 205,236 The Company had no short-term borrowings under the Company’s ABL Facility as of January 28, 2023.
The increase in marketing costs was primarily due to a $5.0 million increase in digital media and retargeting expenses, partially offset by a $1.9 million decrease in print media and catalog costs. Fair Value Adjustments Fair value adjustments consist of the mark-to-market of warrants and derivative liabilities related to the debt restructuring consummated on September 30, 2020.
The increase in compensation and benefits was primarily due to a $2.2 million increase in hourly and part-time wages and salaries expense, and a $0.8 million increase in benefits expense. 35 Fair Value Adjustments Fair value adjustments consist of the mark-to-market of warrants and derivative liabilities related to the debt restructuring consummated on September 30, 2020.
Key elements of cash used in operating activities were (i) net loss of $139.4 million, (ii) adjustments to reconcile net income to net cash provided by operating activities of $93.7 million, primarily driven by impairment of goodwill and intangible assets, impairment of long- 37 lived assets and depreciation and amortization, partially offset by deferred income taxes, and (iii) source of cash from net operating assets and liabilities of $ 10.9 million, primarily driven by increases in accounts payable and accrued expenses partially offset by increase in prepaid expense and other current assets.
Key elements of cash provided by operating activities were (i) net income of $42.2 million, (ii) adjustments to reconcile net income to net cash provided by operating activities of $35.4 million, primarily driven by $25.8 million of depreciation and amortization, and (iii) the use of cash from net operating assets and liabilities of $3.1 million, primarily driven by accounts payable and operating lease assets and liabilities, partially offset by changes in merchandise inventory and prepaid expenses and other current assets.
The Priming Credit Agreement also has certain financial covenants (see Note 10 to the audited consolidated financial statements included in this Annual Report). The Company is in compliance with all covenants. Under the Priming Credit Agreement, the Company had certain payment obligations during Fiscal Year 2021.
Each of the Priming Credit Agreement, the Subordinated Term Loan Credit Agreement and the ABL Credit Agreement also has certain financial covenants (see Note 9. Debt to the audited consolidated financial statements included in this Annual Report). As of January 28, 2023, the Company is in compliance with all such covenants.
Our significant accounting policies related to these accounts in the preparation of our consolidated financial statements are described below (see Note 2 to our audited consolidated financial statements presented elsewhere in this Annual Report on Form 10-K for additional information regarding our critical accounting policies). 39 Revenue Recognition Revenue is primarily derived from the sale of apparel and accessory merchandise through our Retail channel and Direct channel, which includes website and catalog phone orders.
Management evaluates its policies and assumptions on an ongoing basis. Our significant accounting policies related to these accounts in the preparation of our consolidated financial statements are described below (see Note 2. Summary of Significant Accounting Policies to our audited consolidated financial statements presented elsewhere in this Annual Report for additional information regarding our critical accounting policies).
The decrease was driven by lower outstanding balances and interest rates. Income Tax Provision (Benefit) The income tax provision for Fiscal Year 2021 was $8.0 million compared to an income tax benefit of $48.2 million for Fiscal Year 2020. Our effective tax rates were (39.8)% and 25.7%, respectively.
Income Tax Provision The income tax provision for Fiscal Year 2022 was $16.5 million compared to $8.0 million for Fiscal Year 2021. Our effective tax rates were 28.1% and (39.8)%, respectively.
This measure highlights the performance of existing stores open during the period, while excluding the impact of new store openings and closures.
Total company comparable sales include net sales from our retail stores that have been open for more than 52 weeks and from our Direct channel. This measure highlights the performance of existing stores open during the period, while excluding the impact of new store openings and closures.
The ABL Facility also requires the payment of monthly fees based on the average quarterly unused portion of the commitment, as well as a fee on the balance of the outstanding letters of credit. Future Cash Requirements We enter into contractual obligations in the ordinary course of business that may require future cash payments.
Principal is payable upon maturity of the ABL Facility on its termination date. The ABL Facility also requires the payment of monthly fees based on the average quarterly unused portion of the commitment, as well as a fee on the balance of the outstanding letters of credit.
The decrease is driven by a $24.2 million decrease in legal and professional services expenses, a $4.4 million decrease in depreciation and amortization, a $3.8 million decrease in occupancy expenses, a $1.8 million decrease in cancelled projects expense and a $1.9 million decrease in expense related to the write-off of media credits in Fiscal Year 2020, offset by a $21.0 million increase in compensation and benefits, a $2.8 million increase in marketing costs, a $2.1 million increase in credit card fees, and a $2.4 million increase in shipping costs.
The increase is driven by a $4.2 million increase in marketing costs, $3.1 million increase in compensation and benefits, a $1.4 million increase in shipping costs, and a $0.9 million increase in equity-based compensation expense, offset by a $3.5 million decrease in depreciation and amortization.
The brand represents an easy, thoughtful and inspired style that reflects the confidence of remarkable women who live life with joy, passion and purpose. J.Jill offers a guiding customer experience through more than 250 stores nationwide and a robust ecommerce platform. J.Jill is headquartered outside Boston.
The brand represents an easy, thoughtful, and inspired style that celebrates the totality of all women and designs its products with its core brand ethos in mind: keep it simple and make it matter. J.Jill offers a high touch customer experience through over 200 stores nationwide and a robust ecommerce platform. J.Jill is headquartered outside Boston.
Our primary sources of liquidity and capital resources are cash generated from operating activities and availability under our ABL Facility, which has a maturity of May 8, 2023 so long as certain conditions related to the maturity of the term loan are met.
Liquidity and Capital Resources General Our primary sources of liquidity and capital resources are cash and cash equivalents generated from operating activities and availability under our ABL Facility.
Interest Expense, net Interest expense, net consists of interest expense on the Term Loan, ABL Facility, Priming Loan and Subordinated Facility partially offset by interest earned on cash. Interest expense for Fiscal Year 2021 decreased by $0.7 million, or 3.6%, to $17.1 million from $17.7 million for Fiscal Year 2020.
Interest Expense, net Interest expense, net consists of interest expense on the Credit Facilities, partially offset by interest earned on cash. Interest expense for Fiscal Year 2022 increased by $1.0 million, or 5.2%, to $20.1 million from $19.1 million for Fiscal Year 2021. The increase was driven by higher interest rates.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeAs of January 29, 2022, there were outstanding balances of $5.0 million, $203.4 million, and $17.8 million under the Term Loan, Priming Loan and Subordinated Facility, respectively. There were no outstanding borrowings under the ABL Facility. We currently do not engage in any interest rate hedging activity.
Biggest changeAs of January 28, 2023, there were outstanding balances of $201.3 million, and $20.5 million under the Priming Facility and Subordinated Term Loan Facility, respectively. There were no outstanding borrowings under the ABL Facility. We currently do not engage in any interest rate hedging activity.
Based on the schedule of outstanding borrowings as of January 29, 2022, a 10% change in our current interest rate would have affected net income by $1.1 million during Fiscal Year 2021.
Based on the schedule of outstanding borrowings as of January 28, 2023, a 10% change in our current interest rate would have affected net income by $1.6 million during Fiscal Year 2022.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk Interest Rate Risk We are subject to interest rate risk in connection with borrowings under the ABL Facility, Term Loan, Priming Loan and Subordinated Facility, which bear interest at variable rates as defined in the respective agreements described above.
Item 7A. Quantitative and Qualitat ive Disclosures About Market Risk Interest Rate Risk We are subject to interest rate risk in connection with borrowings under the Credit Facilities, each of which bear interest at variable rates as defined in the respective agreements described above.

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